commentary - opec · 2020-02-11 · commentary september 2006 was a special and a not-so-spe-cial...
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September 2006 was a special and a not-so-spe-
cial month for OPEC.
Especially the second week.
This began with the 142nd Meeting of our
Conference on the Monday, at our Secretariat in
Vienna, where the focus, at least as far as the out-
side world was concerned, was on the near-term
outlook for the market. In the light of the sub-
stantial moderation in oil prices in the preceding
weeks, the Conference adopted a cautious, watch-
ful approach, by agreeing that “Member Countries
would take the necessary steps to ensure that sup-
ply and demand remained in balance, with prices
at reasonable levels, supplying to the market the
needed volumes.” At the same time, it “stressed its
determination to ensure that crude oil prices re-
main at acceptable levels and Member Countries
recorded their preparedness to respond rapidly to
any developments which might jeopardize their
interests.” Otherwise, the Conference would wait
until December’s Extraordinary Meeting in Nigeria,
before taking any market-related decisions that
might then be considered necessary.
Tuesday saw the opening of the Third OPEC
International Seminar at the historic Hofburg Palace
in Vienna, and here the emphasis was on longer-
term issues, as was clear from its title, ‘OPEC in a
New Energy Era: Challenges and Opportunities’. As
OPEC Conference President, Dr Edmund Maduabebe
Daukoru, said in his welcoming address: “This
theme has been chosen … to reflect the fact that
there have been fundamental changes to both the
character and the dynamics of the world energy in-
dustry since the turn of the century, and that this
may, in turn, affect the way the industry address-
es the challenges that lie before it.” The partici-
pants included Ministers from OPEC’s 11 Member
Countries and other oil-producing and oil-consum-
ing nations, top officials from intergovernmental
bodies, chief executives of national and interna-
tional oil companies, and renowned academics.
Around 40 presentations later, Dr Daukoru
concluded the two-day event on the Wednesday
with the overriding message that “fossil fuels dur-
ing the so-called new energy era will continue to
dominate the global energy mix and will continue
to be vital for supporting the forecast expansion
in global economic growth, which, under normal
conditions should stay robust.”
Full details of both the Conference and the
Seminar can be found in this issue of the OPEC
Bulletin.
It is clear from these two important events how
much OPEC cares about the welfare of the inter-
national oil market, for both now and the future,
and the lengths to which it will go to ensure order
and stability at all times, to the benefit of produc-
ers and consumers alike.
But the story does not end here! OPEC goes
even further than this.
For a less-heralded, but, in its own way, equally
significant event occurred at the Secretariat on the
Thursday. This was the first meeting of the newly
constituted Editorial Board of the Organization’s
specialist quarterly academic journal, the OPEC
Review. As many readers know, OPEC has been
producing this subscriber journal for 30 years
and, during this period, it has established itself
as a respected scholarly publication, offering its
global readership high-quality papers on energy
economics. Next year, it will be relaunched, to en-
hance its effectiveness as a channel for academic
September 2006 — A special month for OPEC?
discourse, and the Editorial Board, together with
a newly designated General Academic Editor,
the renowned energy specialist Professor Sadek
Boussena, is part of the revamped administrative
structure. OPEC considers it extremely important
to have its own acclaimed academic journal, to
demonstrate to the world at large how seriously it
takes the need to access the very latest high-qual-
ity research to provide an intellectual base to its
actions in the market and elsewhere.
And the Friday? Well, everyone needs time to
recover!
But even more was to come in the third week
of September. This saw top OPEC officials partici-
pate in two high-level meetings in Saudi Arabia on
an issue which is gripping the global consciousness
more than almost any other at the present time
— climate change. One was the First International
Conference on the Clean Development Mechanism
and the other a Roundtable on Carbon Capture and
Storage organised jointly by the European Union
and OPEC as part of the wide-ranging energy dia-
logue they established last year. This demonstrated
the importance OPEC attached to multilateral is-
sues which relate to the provision of modern ener-
gy services, with particular emphasis on the needs
of developing countries, sustainable development,
and the eradication of poverty.
Clearly, with all of this happening, September
2006 was a special month for OPEC.
But was it really so special?
After all, OPEC was merely doing what it has
been doing for decades — actively caring for the
welfare of the oil market. The only difference to
normal was that all this was happening within the
space of one very hectic month.
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Publishers
OPEC
Organization of the Petroleum Exporting Countries
Obere Donaustrasse 93
1020 Vienna, Austria
Telephone: +43 1 211 12/0
Telefax: +43 1 216 4320
Public Relations & Information
Department fax: +43 1 214 9827
E-mail: prid@opec.org
Web site: www.opec.org
Visit the OPEC Web site for the latest news and infor-
mation about the Organization and back issues of the
OPEC Bulletin which is also available free of charge
in PDF format.
Hard copy subscription: $70/year
Membership and aims
OPEC is a permanent, intergovernmental
Or gan i za tion, established in Baghdad, September
10–14, 1960, by IR Iran, Iraq, Kuwait, Saudi
Arabia and Venezuela. Its objective is to co-
ordinate and unify petroleum policies among
Member Countries, in order to secure fair
and stable prices for petroleum producers;
an efficient, economic and regular supply of
petroleum to consuming nations; and a fair return
on capital to those investing in the industry.
The Organization now comprises 11 Members:
Qatar joined in 1961; Indonesia and SP Libyan AJ
(1962); United Arab Emirates (Abu Dhabi, 1967);
Algeria (1969); and Nigeria (1971). Ecuador
joined the Organization in 1973 and left in 1992;
Gabon joined in 1975 and left in 1995.
Covershows the Hofburg Congress Centre, the venue of the
Third OPEC International Seminar on OPEC in a new energy era: challenges and opportunities, held in
Vienna, Austria, from September 12–13, 2006 (see pp22–87).
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Vol XXXVII, No 5, September/October 2006, ISSN 0474–6279
Conference Notes 4
Appointments 20
OPEC Conference calls on non-OPEC producers to step up cooperation in
controlling output
OPEC’s message on importance of security of supply “finally getting through”
(p14)
OPEC Conference observers pledge continued support for OPEC decisions (p16)
Al Hamli elected Conference President for 2007 (p18)Khelil elected Alternate Conference President (p19)
Dr Hussain Al-Shahristani – new Iraqi Oil Minister (p20)
Sheikh Ali Al-Jarrah Al-Sabah – Kuwait’s new Minister of Energy
Dr Shokri Ghanem – appointed by Libya (p21)
OPEC International Seminar 22
Day 1
Welcoming address: Dr Edmund Maduabebe Daukoru, Nigeria
Session One: Global energy outlook: what are the challenges ahead?
Chairman: Abdullah Bin Hamad Al Attiyah, Qatar (p26)Speakers: Andris Kesteris, EU; Mohammed S Barkindo, OPEC;
Rafael Ramirez, Venezuela; Arne Walther, IEF;
Rodrigo de Rato y Figaredo, IMF
Session Two: Oil production capacity expansion
Chairman: Odd Roger Enoksen, Norway (p32)Speakers: Dr Chakib Khelil, Algeria; Ali I Naimi, Saudi Arabia;
Funsho Kupolokun, NNPC; Christophe de Margerie, Total
Session Three: Downstream challenges and opportunities
Chairman: Mohamed Bin Dhaen Al Hamli, UAE (p40)Speakers: Claude Mandil, IEA; Dr Shokri Ghanem, Libya; Guoqiang Tang, China;
Jeroen van der Veer, Royal Dutch Shell; Dr Martin Bartenstein, Austria
Printed in Austria by Ueberreuter Print and Digimedia
Indexed and abstracted in PAIS International
Contributions
The OPEC Bulletin welcomes original contri butions on
the technical, financial and en vi ronmental aspects
of all stages of the energy industry, including letters
for publication, research reports and project descrip-
tions with supporting illustrations and photographs.
Editorial policy
The OPEC Bulletin is published by the PR & Informa-
tion Department. The contents do not necessarily
reflect the official views of OPEC nor its Mem ber Coun-
tries. Names and boundaries on any maps should not
be regarded as authoritative. No responsibility is tak-
en for claims or contents of advertisements. Editorial
material may be freely reproduced (unless copyright-
ed), crediting the OPEC Bulletin as the source. A copy
to the Editor would be appreciated.
Secretariat officialsSecretary General
HE Dr Edmund Maduabebe Daukoru
Acting for the Secretary General
Mohammed S Barkindo
Director, Research Division
Dr Hasan Qabazard
Head, Administration & Human Resources Department
Alejandro Rodriguez
Head, Energy Studies Department
Mohamed Hamel
Head, PR & Information Department
Dr Omar Farouk Ibrahim
Head, Petroleum Market Analysis Department
Mohammad Alipour-Jeddi
Senior Legal Counsel
Dr Ibibia Lucky Worika
Head, Data Services Department
Fuad Al-Zayer
Head, Office of the Secretary General
Abdullah Al-Shameri
Editorial staffEditor-in-ChiefDr Omar Farouk Ibrahim
Senior Editorial Co-ordinatorUlunma Angela Agoawike
EditorJerry Haylins
Associate EditorsKeith Aylward-Marchant
Edward Pearcey
James Griffin
ProductionDiana Lavnick
DesignElfi Plakolm
Photographs (unless otherwise credited)
Diana Golpashin/Ronald Zak
Market Review 88
Noticeboard 106
OPEC Publications 108
Session Four: Role of petroleum technology advances
Chairman: Fernando Canales Clariond, Mexico (p48)Speakers: Guy Caruso, EIA; Abdallah S Jum’ah, Saudi Aramco;
Rex W Tillerson, ExxonMobil; Olivier Appert, IFP;
Robin West, PFC Energy
Session Five: Petroleum and sustainable development
Chairman: José Antonio Ocampo, UN (p54)Speakers: Shri Murli Deora, India; Suleiman Jasir Al-Herbish, OPEC Fund;
David J O’Reilly, Chevron; Nasarudin Md Idris, Petronas
Panel Discussion: The role of OPEC in a new energy era
Chairman: Dr Purnomo Yusgiantoro, Indonesia (p60)Panel members: Sayed Kazem Vaziri Hamaneh, Iran; Hussain Al-
Shahristani, Iraq; Mohamed Bin Dhaen Al Hamli, UAE; Dr Alí Rodríguez
Araque, Venezuela; Sadek Boussena, Algeria; Martin Marmy, IRU;
Paolo Scaroni, Eni; Ian Taylor, Vitol Group; Professor Peter Odell,
2006 OPEC Award Recipient
Closing comments: Dr Edmund Maduabebe Daukoru (p70)
Inter view 72
Spotl ight 74
“Let the best man win!” — Dr Shokri Ghanem
OPEC’s evolving role in a new energy era —
Álvaro Silva Calderón
Award recipient:
Professor Peter Odell
OPEC Award ceremony 78
Day 2
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As concerns over effects of crude oil oversupply heighten …
OPEC Conference calls
on non-OPEC producers
to step up cooperation
in controlling output
OPEC has called on non-OPEC producers to
continue cooperating with the Organization over oil pro-
duction levels, following concerns that crude prices might
fall too low next year as a result of a growing oversupply
in the market.
The 142nd Meeting of the OPEC Conference, held in
Vienna in September, highlighted the important role
played by all oil-producing nations — OPEC and non-OPEC
countries alike — in securing oil market stability.
In a communiqué issued at the end of the Ministerial
Meeting, the Conference reiterated that it needed the help
of non-OPEC producers to achieve market stability with
prices that were “reasonable and consistent with robust
economic growth.”
The Ministers pointed out that a fair level of price
should be sufficient for providing steady revenue streams
for the producing countries and the industry as a whole,
as well as being conducive to the expansion of upstream
Arriving at the OPEC Secretariat in Vienna to attend the 142nd Meeting of the OPEC Conference are Ali I Naimi, Saudi Arabian Minister of Petroleum & Mineral Resources (pictured left) and Dr Chakib Khelil, Algerian Minister of Energy and Mines (below).
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s and downstream capacity, so that demand for crude and
oil products could be comfortably met in the future.
Members of OPEC have been pumping close to capac-
ity for some time as part of the Organization’s bid to keep
the market adequately supplied, as well as take the heat
out of rising prices, which, despite the higher output, have
still managed to virtually triple since 2002.
The higher production and prices have obviously spelt
good news for the development of Member Countries’
economies. The situation has also given a welcome boost
to potential investment opportunities in the industry, an
area that is becoming increasingly important for securing
the industry’s future.
However, in reviewing the oil market situation during
the Conference, OPEC’s Ministers were reminded of the
fact that the increases in production they had instigated
over the past few years — amounting to around 4.5 million
b/d since 2002 — had contributed to a build-up in stocks
to a level well in excess of their five-year average.
Below: Dr Chakib Khelil, Algerian Minister of Energy and Mines (c), Hamid Dahmani (r), Algerian Governor for OPEC, and the Algerian Ambassador to Austria, Taous Feroukhi (l).
Abdullah bin Hamad Al Attiyah, Qatar’s Second Deputy Prime Minister and Minister of Energy and Industry, arrives
at OPEC headquarters.
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Left: Pictured at the plenary session is the Iranian delegation, headed by Sayed Kazem Vaziri Hamaneh (l), Minister of Petroleum, accompanied by the Iranian National Represetative to OPEC, Javad Yarjani.
Dr Edmund Maduabebe Daukoru, President of the OPEC Conference and Nigerian Minister of State for Petroleum Resources.
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Although this had undoubtedly reduced anxiety in the
marketplace over a potential supply crunch occurring, on
the other side of the coin such high inventories posed
a potential threat to oil prices, especially if the non-fun-
damental elements supporting price levels today, such
as geopolitical tensions, were suddenly removed.
More worrying for the Ministers was a report show-
ing that, against this background of crude oil supply out-
stripping demand, production from non-OPEC produc-
ers, which fell back somewhat in 2005, was forecast to
rebound strongly.
Figures provided by the OPEC Secretariat said that
output from non-OPEC producers was expected to rise
by one million b/d this year, and to almost double that
to 1.8m b/d in 2007.
It is this rebound in supply — incidentally the high-
est for non-OPEC since 1984 — that has sent alarm bells
ringing within OPEC. It inevitably points to a worsening
of the imbalance between supply and demand, making
next year potentially difficult.
And with prices already falling back — the OPEC Basket
declined by over $5/b between August and September
— OPEC’s Ministers decided to act quickly by urging pro-
ducers outside the Organization to cooperate in support-
ing oil market stability.
Asked about the slump in prices ahead of the
Ministerial talks, OPEC Conference President Dr Edmund
Maduabebe Daukoru said the development was “worri-
some and unmitigated.”
He acknowledged that, due to a slowdown in demand,
coupled with higher output from non-OPEC producers and
the very high stock levels, prices had suffered a partial
meltdown — falling from $78/b to around $67/b in just
30 days — which represented one of the biggest short-
term price drops in recent years.
Daukoru, who is Nigeria’s Minister of State for
Petroleum Resources, pointed out that as OPEC built up
its output capacity, “we see it (the market) going back to
the classic relationship between stocks and price — the
higher the stocks, the lower the price.”
He explained that when OPEC’s spare production
capacity was low, the market simply ignored stock levels
— and the prices “kept galloping ahead”. OPEC was now
building up its spare capacity — a fact that was reassur-
ing people on supply, and resulting in the usual market
dynamics beginning to apply.
Heading the Saudi Arabian Delegation is Ali I Naimi (l), Saudi Minister of Petroleum & Mineral Resources, pictured here with the Saudi Ambassador to Austria, Omer Mohammed Kurdi.
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Dr Hussain Al-Shahristani, Iraqi Minister of Oil and Iraq’s Ambassador to Austria, Tariq Aqrawi (r).
Dr Shokri Ghanem (l), Chairman of the People’s Committee, the National Oil Corporation of the SP Libyan AJ, with Dr Edmund Maduabebe Daukoru, President of the OPEC Conference and Nigerian Minister of State for Petroleum Resources, and Dr Mussam H Al-Dujayli (c) from the Iraqi Delegation.
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“That is why we now have to take stock levels more
seriously than before. The market is oversupplied. We
have had almost four good years, and we do not want to
leave anything to chance,” he stated.
The Conference President observed that OPEC for
some time had been on “autopilot” with regard to its pro-
duction policy decisions, but now it was perhaps “time
to take manual charge again”.
The oversupply problem was also brought to the atten-
tion of the Ministers by the Organization’s Ministerial
Monitoring Sub-Committee, which, after studying the
situation, recommended that the Conference urge all
Member Countries to strictly enforce output quotas at a
time of increasing concern about falling oil prices.
The Sub-Committee, comprising the Oil and Energy
Ministers of Iran, Kuwait and Nigeria, studies supply,
Heading the Indonesian delegation to the Meeting is the Ambassador to Austria, Triyono Wibowo (r), here with Dr Maizar Rahman, Indonesian Governor for OPEC and Chairman of the OPEC Governing Board.
Mohamed Bin Dhaen Al Hamli (l), Minister of
Energy of the United Arab Emirates; HRH Prince
Abdulaziz Bin Salman (r) from Saudi Arabia; and
the UAE’s Ambassador to Austria, Ahmed Fahad
Al-Dosari (c).
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demand and pricing data ahead of each OPEC Ministerial
Meeting to offer advice to the Ministers on what policy
decisions to adopt.
Sub-Committee Chairman Sayed Kazem Vaziri
Hamaneh, Iran’s Petroleum Minister, said in a brief inter-
view afterwards that supply from both OPEC and non-OPEC
producers was higher than demand, which was moderat-
ing at the moment.
“Stocks are also at a very high level — maybe at lev-
els we have not seen in the past, due to the fact supply
has been at such high levels for some time. This has put
some considerable pressure on prices,” he maintained.
The Minister explained that during a time of higher
prices, some producing fields that were not economi-
cal with lower prices had come onstream, meaning that
more supply was available. This was a trend that could
continue in the months ahead.
After detailed discussions, the Sub-Committee saw
no reason to adjust OPEC’s current production ceiling of
28m b/d, but recommended that the Ministers sought
strict adherence to this level of output.
Ms Siham Abdulrazzak Razzouqi (l), head of the Kuwaiti delegation and Kuwait’s Governor for OPEC, with Sayed Kazem Vaziri Hamaneh (c), Iranian Minister of Petroleum and Hossein Kazempour Ardebili (r), Iranian Governor for OPEC and Senior Advisor to the Iranian Minister.
Above: Abdullah bin Hamad Al Attiyah (r), Qatar’s Second Deputy Prime Minister and Minister of Energy and Industry and Abdulla H Salatt, Qatar’s Governor for OPEC and Senior Advisor to the Minister.
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Over the years, OPEC has learned — often to its cost
— that close scrutiny of the international oil market, and
especially good foresight, coupled with speedy action,
are essential for successfully overcoming potential prob-
lem areas.
“It used to be a case of the old adage … closing the
gate after the horse has bolted, but fortunately, nowa-
days, OPEC’s Ministers are more adept at staying one
step ahead of the game. They are now seeing problems
materializing on the horizon and are acting quickly and
effectively before they come to fruition,” commented one
OPEC Conference observer.
He said the Organization was fully cognizant of the
fact that its policy of maximizing production, although
commendable in ensuring more-than-adequate supply
and instilling confidence in the consuming countries,
had a potential downside.
“Everyone who has been in this industry knows the
effects a glutted market can have on the market — we
have suffered single digit oil prices because of that in
the past. The secret is to get a feel — an insight — into
the way things are likely to go and from its many years
of experience, OPEC now does that increasingly well,” he
added.
OPEC remains committed to its proactive policy of
supporting market stability and is continuing with its
production capacity expansion plans to ensure that a
comfortable supply cushion is in place for all demand
eventualities.
This policy has the overriding aim of bringing about
market conditions that will support world economic
growth levels. OPEC is especially concerned about the
effects sustained high crude prices could have on the
economies of oil-importing developing countries, where
Rafael Ramirez (c), Venezuelan Minister of Energy & Petroleum being questioned by members of the press, with Iván A Orellana (r), Venezuelan Governor for OPEC.
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it knows that reasonable price levels are essential for
allowing much-needed socio-development programmes
to proceed unhindered.
In support of this caretaking role, the OPEC Con-
ference said its Members would take all necessary
steps to ensure that supply and demand remained in
balance. The Ministers again stressed their determina-
tion to ensure that crude oil prices remained at accept-
able levels.
They stated that they would continue to vigilantly mon-
itor supply and demand fundamentals and, in the light of
the many downside risks already identified, empowered
the Conference President to “make the necessary consul-
tations prior to the December (OPEC) Meeting, should
market conditions so warrant.”
Said the OPEC communiqué: “Member Countries
recorded their preparedness to respond rapidly to any
developments which might jeopardize their interests.”
Barring any action in between, the Conference
said it would review market developments at its 143rd
(Extraordinary) Meeting in Nigeria on December 14.
At the press briefing held at the close of the Vienna
Ministerial talks, Daukoru did not define a price band
that the Organization was seeking to establish, but said
such a price should be “very, very reasonable”.
He added: “There are very deep explorations going
on off the coast of West Africa and in the Gulf of Mexico
and that sort of exploration needs robust prices, or no-
one will make the commitment to exploration. That is
what we mean by a reasonable price, for everyone.”
Conducting the final press conference are Dr Edmund Maduabebe Daukoru (l), President of the OPEC Conference and Nigerian Minister of State for Petroleum Resources, and Dr Hasan M Qabazard (r), Director of OPEC’s Research Division.
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OPEC Conference President, Dr Edmund Maduabebe
Daukoru, has said that the Organization’s conviction that
security of demand must go hand-in-hand with security
of supply as a means of achieving oil market stability was
finally gaining recognition within the industry.
“We are pleased to see that this message is finally get-
ting through,” the Nigerian Minister of State for Petroleum
Resources told the plenary session of the 142nd Meeting
of the OPEC Conference.
He stressed that without producer confidence that
predictable, reliable demand for oil would emerge, the
incentive to undertake the necessary investments for
capacity expansion could be in jeopardy.
OPEC, said Daukoru, was particularly pleased about
the broader-based approach towards the issue of energy
security that emerged from consuming countries at the
G8 Summit in St Petersburg, Russia in July.
OPEC’s message on importance of security
of supply “finally getting through” — Daukoru
Dr Edmund Maduabebe Daukoru (l), President of the OPEC Conference and Nigerian Minister of State for Petroleum Resources and Mohammed Barkindo (r), Acting for the OPEC Secretary General.
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“We hope that this will bring to an end the narrow
viewpoint on this important issue that has been prevalent
for decades in policy circles, which stressed only security
of oil supply,” he stated.
Turning to oil prices, Daukoru said that since the last
OPEC Meeting in Caracas, Venezuela in June, the price
of the OPEC Reference Basket had reached new record
highs, exceeding $70/b, before softening considerably
ahead of the September OPEC talks.
He noted that the high price trend had again per-
sisted, despite the oil market remaining well-supplied
with crude, with commercial stocks at very high levels
— both in absolute volumes and days of forward cover.
The specific reasons for the summer price peaks were
the outbreak of hostilities in Lebanon, fears of hurricanes
in the US Gulf, coupled with the sudden shutdown of the
Prudhoe Bay oil field in Alaska. These were in addition
to the prevailing market influences of concern over the
lack of effective global oil refining capacity, anxiety about
the ability of oil producers to meet anticipated future oil
demand, geopolitical developments in some producing
countries and speculation in the oil futures markets.
Daukoru told his fellow Ministers that it was of par-
ticular interest to note that the relationship between
crude and product prices had appeared to have diverged
recently, with gasoline prices showing greater volatility
than crude. Between the end of 2004 and July this year,
the price of United States benchmark crude West Texas
Intermediate had risen by $26/b, or by about 50 per cent,
compared with the much higher $46/b, or 90 per cent,
for US gasoline prices, he explained.
“Crude oil volatility appears to have subsided over the
past year, due to ample supply, rising OPEC spare capac-
ity, plentiful strategic reserves and abundant commercial
crude inventories, which are now at their highest levels
since 1998,” Daukoru affirmed.
On the other hand, he said, the increasing volatil-
ity of gasoline could be attributed to higher demand,
increasingly stringent product specifications and the
issue of the adequacy of ethanol supplies. In particular,
the relatively low level of gasoline inventories, in terms
of days of forward cover, coupled with the lack of spare
refinery capacity, had left an uncomfortably thin cushion
of spare supply. “Hence, the growing volatility reflects
an increased sensitivity to developments in the product
markets, such as unexpected outages or even planned
refinery shutdowns,” commented Daukoru.
The Minister said that speculation, which had been
responsible for pushing prices to levels far above those
warranted by market fundamentals, was not only dis-
ruptive for the oil industry, but was also having serious
knock-on effects further afield in the global economy, with
potentially serious repercussions for the highly indebted
developing countries.
“It is essential, therefore, that this issue is addressed
effectively soon, once and for all, particularly where it
involves parties far removed from the day-to-day affairs
of the industry,” contended Daukoru.
The Conference President reiterated that effective
processes of dialogue and cooperation provided the cor-
nerstone of a stable and orderly international oil market,
benefiting producers and consumers alike.
Dr Daukoru with Rafael Ramirez, Venezuelan Minister of Energy & Petroleum.
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and consumers is essential for identifying the market’s
needs, to achieve benefits mutual to all involved, and to
guarantee resources for exploration. We are happy to col-
laborate with OPEC in its desire to bring stability to world
oil markets.” He assured the Ministers that the arrival of a
new Mexican government would not result in a change of
the country’s oil production policies. Investment in explo-
ration and production had increased in recent years and
stood at $10.5 billion in 2005. Mexico’s current oil pro-
duction stood at 3.4m b/d — an all-time record high, he
added. In the country’s downstream operations, refiner-
ies had been adapted to allow for the increasing require-
ment of being able to process heavy crudes.
Sameh Fahmy, Egyptian Minister of Petroleum — in com-
menting on the current high oil prices, said this situation
was not of OPEC’s doing. “OPEC efforts and its commit-
ment to market stability have led to a comfortable sup-
Dr Hector Moreira, Mexican Under-Secretary for
Hydrocarbons — expressed his country’s interest in con-
tinuing a dialogue with OPEC to broaden its views on oil
market perspectives. “For our country, dialogue between
oil-producing countries is key to ensuring coordinated
actions towards market stabilization efforts. We also
believe that sustained cooperation between producers
Conference observers pledge
continued support for OPEC decisions
Dr Hector Moreira (seated), Mexican Under-Secretary for Hydrocarbons and Raúl Cardoso, Director of PMI Spain.
Sameh Fahmy, Egyptian Minister of Petroleum, with Eng Shamel Hamdi, First Undersecretary.
As on many previous occasions, high-level representatives from
leading non-OPEC oil-producing countries — namely Mexico,
Egypt, Russia, Angola and Syria — once again attended the
Conference as observers. OPEC Ministers greatly value their
input, which forms an important part of the dialogue and
consultations OPEC promotes with fellow oil-producing nations
in its bid to achieve stability in the global oil market. Below are
some of their comments made at the plenary session.
17
ply situation. Furthermore, OPEC Countries always react
instantaneously to any supply disruption.” He said prices
were being driven by concerns over sufficient spare out-
put capacity being available, continuing tightness in the
refining sector, as well as geopolitical developments —
factors that oil producers had no influence over. He said
that, in the short term, the industry had to build more
production capacity and countries needed to look for
more reserves. “This means we can respond to market
demands more promptly. More investment is needed, of
course taking into account the capital intensive nature
of the oil industry,” Fahmy added. He reiterated Egypt’s
support for decisions taken by OPEC to achieve market
stability, stressing that success in achieving this desired
equilibrium and a moderating of prices required the full
support and cooperation of all players in the market —
both the producers and consumers. “All parties gain from
market stability, so all parties must contribute to enhanc-
ing it,” he declared.
Andrey G Reus, Russia’s Vice Minister of Industry and
Energy — stated that the world oil market needed stability
and predictability, but that could only be ensured through
the joint efforts of all the participating parties, namely
suppliers, consumers, and transit countries. “If we are to
attract the huge investments needed for the petroleum
sector, we require investors to have the confidence in the
viability of bringing new facilities onstream. We need a
regular exchange of timely information,” he maintained.
Desiderio da Graca Verissimo e Costa (r), Angolan Minister of Petroleum, accompanied by José Paiva, Director of Sonangol.
Andrey G Reus (seated), Russia’s Vice Minister of Industry and Energy, and Dr Stanislav Zhiznin, Senior Counsellor, Department of Economic Cooperation, Ministry of Foreign Affairs, Russian Federation.
Ing Safian Al-Alao, Syrian Minister of Petroleum and Mineral Resources.
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Al Hamli elected
Conference President
for 2007
The 142nd Meeting of the OPEC Conference elected
Mohamed Bin Dhaen Al Hamli, Minister of Energy of the
United Arab Emirates, as President of the Conference for
one year, with effect from January 1, 2007.
He said Russia welcomed measures taken by OPEC to
ensure stability in the global oil market. Domestically, he
said Russia was in a unique situation. On the one hand
the country was a global energy supplier, but on the other
it was a global energy consumer. And at the same time, it
was a transit country. “We are well aware of all the risks
in this process,” he affirmed.
Desiderio da Graca Verissimo e Costa, Angolan Minister
of Petroleum — thanked the Conference for allowing coun-
tries such as his to share in the discussions and informa-
tion so that proper and coordinated action to stabilize
markets could be taken. He put forward the view that
political factors still remained the biggest threat to oil
prices. Domestically, he said Angola’s output continued
to increase, with new production due to come online in
December. By the middle of next year, another oil devel-
opment would add an additional 200,000 barrels per
day to total output. “Angola remains on course to reach
a total production level of 2m b/d by the end of next year,
or early in 2008,” he told the Conference.
Safian Al-Alao, Syrian Minster of Petroleum and
Mineral Resources — said it was a great pleasure to join
in the efforts being made by the OPEC Conference in the
Organization’s bid to stabilize the market.
Al Hamli, Chairman of the Board of Directors of the
National Gas Shipping Company and the Abu Dhabi
National Tanker Company, was the UAE’s Governor for
OPEC between 1994 and 2002. He became his country’s
Energy Minister in November 2004.
Married, with seven children, he is also a Board
Member of ADNOC Distribution, the Abu Dhabi Oil Refining
Company, the International Petroleum Investment
Company, the Abu Dhabi Retirement Pensions and
Benefits Fund, the Higher Corporation for Specialized
Economic Zones, the Hyundai Oilbank Company, South
Korea, as well as a Committee Member of the Supreme
Petroleum Council (SPC).
Born in December 1952, Al Hamli completed the
Advanced Management Programme at Harvard Business
School in 1988. Before that, in 1980, he was appointed
Internal Auditor at the Abu Dhabi Marine Operating
Company, where over a nine-year span, he held a
number of positions including, Controller, Internal Audit,
Manager of Management Research, Manager of
General Services, and Assistant General Manager
(Administration).
In February 1989, Al Hamli was appointed Director of
Finance at the Abu Dhabi National Oil Company (ADNOC),
a position he held for one year before becoming Director
of Marketing.
In May 1992, he was appointed Director of Personnel
at ADNOC and six years later became Director of Marketing
and Refining, a position he still holds today. In between,
he also spent 18 months as General Manager of ADNOC
Distribution, a responsibility he assumed in March
1997.
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Dr Falah J Alamri, Governor for Iraq, was
appointed Alternate Chairman of the
Governing Board for the same period.
The Conference appointed Hossein Kazempour
Ardebili, Governor for Iran, as Chairman of the
Board of Governors for the year 2007.
Khelil elected
Alternate Conference
President
Dr Chakib Khelil, Minister of Energy and Mines of Algeria,
was elected Alternate President of the Conference, with
effect from January 1, 2007.
Born in August 1939, he has held his country’s energy
portfolio since December 1999.
Khelil, who is married with two children, joined the
World Bank in 1980, where, for almost 20 years, he carried
out petroleum projects in Africa, Latin America and Asia.
He was appointed Head of the Bank’s Energy Unit for Latin
America and finally became its Petroleum Adviser.
He took early retirement from the Bank in October
1999 to become Adviser to the President of Algeria.
Proficient in five languages — English, French,
Spanish, Portuguese and Arabic — Khelil attained a PhD
in Petroleum Engineering at the Texas A & M University,
in the United States, in 1968.
He first worked for Shell and Phillips Petroleum in
Oklahoma and also D R McCord and Associates in Dallas,
Texas.
Khelil returned to Algeria in 1971 as Head of the
national oil company Sonatrach’s Petroleum Engineering
Department. He was also appointed President of Alcore,
a joint venture between Sonatrach and Corelab.
Two years later, he became Technical Adviser to the
Algerian President, a position he held for three years. He
also became President of the Valhyd Programme in Algeria
to plan, develop and finance hydrocarbons resources.
20
Dr Hussain Al-Shahristani
– new Iraqi Oil Minister
Dr Hussain Al-Shahristani was appointed Minister of Oil
for Iraq in May this year by the country’s first democrati-
cally elected government.
Born in Karbala in 1942, he took up the post after
being First Deputy Speaker in the Interim National
Assembly in 2005.
A nuclear scientist, he obtained a BSc (Eng) and DIC
from Imperial College, London in chemical engineering
in 1965 and an MSc in 1967. His PhD in Nuclear Science
came in 1970 from the University of Toronto, Canada.
In the same year, he took up employment with the
Nuclear Research Centre in Baghdad. In 1979, he was
promoted to Chief Scientific Advisor to the Iraqi Atomic
Energy Commission.
Unfortunately, in that same year he was jailed for
refusing to work on nuclear military programmes. He was
incarcerated for 12 years before managing to escape to
the United Kingdom, where he became a Visiting Professor
at the University of Surrey.
Sheikh Ali Al-Jarrah
Al-Sabah – Kuwait’s new
Minister of Energy
Sheikh Ali Al-Jarrah Al-Sabah was appointed Minister of
Energy of Kuwait in July this year.
Before taking over the energy portfolio, Sheikh Ali,
who was born in January 1950, was first Minister of Social
Affairs and Labour and then Minister of Commerce and
Industry.
A Bachelor of Political Science, which he attained
at Kuwait University in 1971, Sheilk Ali’s career started
in 1972 when he became the Attaché at the Economic
Department of the Kuwait Foreign Ministry.
From 1973 to 1975, after moving to the Kuwait
Embassy in Tehran, he progressed from Third Secretary
to First Secretary. He was then appointed Director of Local
and Arab Investment at the Ministry of Finance, a posi-
tion he held for eight years.
In 1976, he spent two years with the Kuwait
Investment Office in London and in 1977 was made Head
of the Founding Committee of the Kuwait Finance House.
One year later he was appointed a Board Member of the
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Dr Shokri Ghanem –
appointed by Libya
Egyptian-Kuwaiti Real Estate Development Company
(Egypt), and in 1979 became Chairman of the Kuwait Re-
Insurance Company.
Sheikh Ali then received a number of banking
appointments, including Deputy Chairman, Bahrain
Kuwait Insurance Company, a Founding Member and
Chairman of the Kuwaiti Tunisian Bank, Chairman of the
Egyptian-Kuwaiti Real Estate Development Company,
Board Member and later Chairman of the Bahrain
Middle East Bank, Board Member and later Chairman
Dr Shokri Ghanem, a former Director of the Research
Division at the OPEC Secretariat in Vienna, was appointed
Libya’s Chairman of the People’s Committee, the National
Oil Corporation (NOC), in March this year.
Before moving to his present post, Ghanem, who
headed the OPEC Research Division for eight years
from July 1993, was Secretary of the General People’s
Committee, a position he held for three years.
and Managing Director of the Burgan Bank, Board
Member and later Chairman of the International Bank of
Asia, Founding Member and Board Member of the Arab
Banking Corporation (ABC), Bahrain, and Member of
the Executive Committee and Board Member of Banco
Atlantico, Spain.
In 2000, he became a Member of the Executive
Committee of the Bahrain Middle East Bank. He was later
appointed Executive Committee Head and then Chairman
of the bank.
Before that he was Secretary of the General People’s
Committee for Economy and Trade, a portfolio he took up
after his term with the OPEC Secretariat ended.
Born in Tripoli in October 1942, Ghanem studied at the
University of Libya, Benghazi, where in 1963 he attained
a BA in economics. Nine years later, at the Fletcher School
of Law and Diplomacy, Boston, Mass, in the United States
he gained his Economics Masters degree. One year later,
he attained a Masters in Law and Diplomacy. In 1975,
he gained a PhD in international economics at the same
university.
Ghanem began his career at the Libyan Economy
Ministry in 1963, where he was Deputy Director and then
Director of Foreign Trade. Five years later he moved to the
Ministry of Petroleum, where, during a nine-year stay, he
held numerous positions, including Member of the Board
of Directors and Director of Marketing (NOC), Director of
Economic Affairs, Under Secretary, and Chief Advisor.
In 1977, he was appointed Chief Economist and
Director of the Energy Studies Department of the Arab
Development Institute in Tripoli, where he stayed for 11
years. Also, between 1982 and 1984, Ghanem was an
academic visitor to the School of Oriental and African
Studies, at the University of London.
In 1988, Ghanem became a Professor of International
Economics at the Faculty of Economics, Al-Fateh
University, Tripoli and at the El-Jabal El Gharbi University,
Gharyan. He lectured at these establishments for five
years before taking up his position with the OPEC
Secretariat in the Austrian capital.
Ghanem, who is married with three daughters and
a son, has, during his distinguished career, attended
numerous international conferences, often as a keynote
speaker and/or panelist, as well as publishing many arti-
cles in Arabic and English for specialized energy publica-
tions. He has also authored a number of books in Arabic
and English.
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“ O u t s t a n d i n g ! ”OPEC Seminar on new energy era hailed a resounding success
The challenges and opportunities facing OPEC and the international oil industry in
the much-heralded new energy era were the subject of extensive discussion at the
Organization’s Third International Seminar, in Vienna, on September 12–13 —
an event that proved to be another landmark achievement for the Organization.OP
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Sponsored by PERTAMINAAlways There
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OPEC Conference President, Dr Edmund Maduabebe Daukoru (above), introduced by the Master of Ceremony, Eithne Treanor (r), during the opening ceremony of the seminar held at the Hofburg Palace (pictured below) in Vienna, Austria.
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“Our minds have been assailed bya torrent of ideas, information,
statistics, interpretations and visions …”Dr Edmund Maduabebe Daukoru
The Third OPEC International Seminar, organized by the
London-based CWC Group, in conjunction with the OPEC
Secretariat, truly left its mark in heralding the new energy
era. A prestigious and busy two-day event, it attracted
some 500 participants and speakers, including oil and
energy ministers, oil company executives, high-level con-
suming and producing government representatives and
petroleum experts and analysts.
Most importantly, it marked another valuable step
forward in OPEC’s growing relations with other players
associated with the international oil market.
Fittingly held at the splendid Hofburg Palace, home to
the Austrian Habsburg-Lothringen emperors until 1918,
where many landmark decisions have been made over the
years, the seminar’s packed agenda, which was divided
into various categories, covered a series of topical issues
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that will continue to have a bearing on the contemporary
oil industry.
In describing the gathering as “outstanding”, OPEC
Conference President, Dr Edmund Maduabebe Daukoru,
said at the culmination of the discussions: “Our minds
have been assailed by a torrent of ideas, information,
statistics, interpretations and visions … it will probably
be a day or two before we can sift through them all and
consolidate our own personal perspectives.”
In his closing remarks to the event, he continued:
“There is, indeed, plenty to reflect upon and, if this in
any way enhances our individual and collective contri-
butions to meeting the global energy challenges, then
the seminar can truly be adjudged a success.
“I am sure we have all benefited in some way from
this seminar. Numerous positions and points of view have
been outlined and many messages have been delivered,
covering the whole spectrum of energy as seen from the
perspective of producers, consumers and investors alike,”
he said.
Fundamental changes
Daukoru, who is Nigeria’s Minister of State for Petroleum
Resources, told participants that it had been “a privilege
and an honour” to be entrusted with such an undertak-
ing — a gathering of such eminent people from different
parts of the world energy industry, in the fields of govern-
ment, industry, academia and the media.
Two days earlier, in officially opening the seminar,
he referred to the event’s theme ‘OPEC in a New Energy
Era: Challenges and Opportunities’, which, he said, had
been chosen after careful deliberation and to reflect the
fact that there had been fundamental changes to both the
character and the dynamics of the world energy industry
since the turn of the century.
This metamorphosis, he said, in turn could affect
the way the industry addressed the challenges that lay
before it.
“We shall, in fact, be assessing the extent to which
this really is a new energy era. We shall also be cognizant
of the fact that challenges, if mastered wisely, create new
opportunities from which the world at large can — and
should — benefit,” he told delegates.
Daukoru said that during this “changing tide of
events”, current perceptions about the true state of the
industry had come under scrutiny.
“This has resulted in some familiar perennial debates
being pursued with renewed vigour in such key areas as
energy security, global resources, the supply and demand
balance and price stability,” he noted.
Broader-based issues
He said the seminar would look at these and many other
topical issues that related to the day-to-day running of
the industry, as well as its orderly development in the
years ahead.
At the same time, participants would discuss the
broader-based issues, such as the environment, sustain-
able development and the eradication of poverty.
Daukoru said that in order to tackle the extensive
subject-matter, the seminar had been divided into six ses-
sions: Global energy outlook — what are the challenges
ahead?; Oil production capacity expansion; Downstream
challenges and opportunities; Role of petroleum technol-
ogy advances; Petroleum and sustainable development;
and The role of OPEC in a new energy era.
The seminar attracted participants from across the
international energy spectrum, including ministers from
OPEC Member Countries and other oil-producing and oil-
consuming nations, top officials from intergovernmental
bodies, chief executives of national and international oil
companies, and renowned academics.
The Fourth OPEC International Seminar is scheduled
to be held in September 2008.
The Seminar attracted some 500 participants and speakers, including oil and energy ministers, oil company executives, high-level consuming and producing government representatives and petroleum experts and analysts.
The following 62 pages offer a comprehensive account of all speakers’ addresses
delivered over the two days of the seminar, as well as full pictorial coverage.
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The objectives of the first session comprised highlighting the main developments of the energy sector; addressing the short- and long-term prospects for the world economy and the oil market; and focusing on the challenges facing producers and consumers and their implications on the energy sector.
Session One:
Global energy outlook: what are the challenges ahead?
Session Chairman was Abdullah bin Hamad Al Attiyah,
Second Deputy Prime Minister and Minister of Energy and
Industry of Qatar.
In brief remarks before introducing the speakers, Al Attiyah said the title of the seminar
was very important, but he maintained that the issue should not be limited to defining
the challenges ahead, but finding ways to cooperate to overcome the challenges, such as
supply disruption, securing continued world economic growth, and ensuring improved
standards of living for all people. “We always live with challenges — we cannot live with-
out them,” he said.
Day 1 September 12, 2006
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The energy challenges the world was facing, said Kesteris,
had never been greater. Three important areas that
demanded close attention were global warming; the rapid
growth in world energy demand and its effect on prices;
and security of supply, which involved coping with increas-
ing competition for limited resources of oil and gas.
In its response to the challenges, the Economic
Commission (EC) had drawn up a green paper on a
European Union (EU) energy strategy, which was issued
in March this year.
This, said Kesteris, established three equal and com-
plementary objectives for a regional energy policy — sus-
tainability, competitiveness, and security of supply. It also
set out a list of priority areas which it considered a new
energy policy for Europe should address.
He explained that the blueprint for the new policy
would be the EC’s Strategic European Energy Review,
which the Commission intended to release in January
2007.
This document, said Kesteris, would set out where
Europe was heading under current policies and consump-
tion patterns and where it needed to make changes to
achieve its policy goals.
“It will be the first step towards finding common
answers to the challenges we face, and finding a way for
Europe to pursue them collectively,” he said.
Kesteris noted that in support of this goal the EU had
launched energy dialogues with all the major producers
and consumers, including OPEC, Norway, Russia, the Gulf
Cooperation Council (GCC), the Caspian Sea states, North
African countries, the United States, China, India, Korea,
ASEAN and MERCOSUR, while also participating fully in
the IEA and the workings of the Group of Eight industri-
alized countries.
“The aim of these dialogues is to exchange views
about the main challenges shaping the future of energy
markets and to promote policies and technologies to
cope with these challenges,” he affirmed.
Kesteris noted that, within its energy dialogue, three
ministerial meetings had so far been held with OPEC and
this year would see four joint events held, covering work-
shops on carbon capture and storage, energy policies,
refining investment needs, and the impact of market
speculation on oil prices.
The EU, he stressed, intended to pursue and deepen
this dialogue with OPEC, as well as with other interna-
tional players. This was a major policy tool for facing the
future challenges of the energy sector.
“Energy is a global issue. The G8, the IEA, ASEAN,
MERCOSUR, OPEC and, of course, the EU, have all placed
energy at the top of their agendas — and rightly so,” said
Kesteris.
“In my view, dialogue and global consensus-build-
ing are the only way forward. This is why today’s seminar
is so important. And this is why the EU will continue to
involve OPEC in its future work,” he added.
The keynote address for this session was
given by Andris Kesteris, Head of Cabinet
of Commissioner Piebalgs at the European
Commission, who spoke on the European
Union’s energy outlook and the challenges
ahead.
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Looking at the situation today, said Barkindo, anxiety and
concern about local, regional and global energy secu-
rity was topping the political agendas of most countries,
regarding not just oil, but the entire energy value chain.
“Amid such volatility and risk, uncertainty and
challenges abound, but so too do opportunities,” he
stated.
In the 21st century, he said, there were many issues
to consider in the shifting dynamics of price, supply and
demand. These included the future role of OPEC and non-
OPEC supply, the resource base issue, new technologi-
cal developments, the changing and expanding role of
national oil companies, environmental considerations,
biofuels and other alternatives, the downstream sector,
as well as rising project costs involving infrastructure and
human resources.
Barkindo said it was still difficult to say whether this
changing face of the oil industry meant “we are entering
a new energy era”, but what was clear was that there were
many new realities at play.
“The focus must be two-fold — viewing the entire
In the next address, Mohammed
S Barkindo, Acting for the OPEC
Secretary General, gave an overview
of the energy outlook, including
challenges and opportunities facing
the Organization.
S e s s i o n 1 f i r s t t h r e e s p e a k e r s
energy market holistically; and taking into account the
multiple time horizons. It is critical that we, as an indus-
try, tackle the challenges and opportunities collectively,
and head on,” he professed.
Barkindo pointed out that against a background of
rising demand OPEC continued to play its part in keeping
the market well-supplied, as well as ensuring that a com-
fortable cushion of spare capacity existed at all times.
“From an OPEC perspective, we believe the
Organization is becoming better understood in its
dedication to supporting market order and stability and
to meeting the challenge of global energy security in the
years ahead.
“Yet, we also recognize that neither the public, the
private sector, nor one country, region or organization
acting alone can protect themselves from the vagaries
and shifting dynamics of the global oil market. It is, thus,
vital that we understand the needs of each stakeholder,”
contended Barkindo.
He said OPEC very much believed that enhanced dia-
logue and cooperation offered the best platform from
which to collectively tackle current and future market
challenges and opportunities.
To this end, the Organization continued to devote
much effort in this direction, with dialogue now being
widened and deepened in an open and constructive
spirit, he affirmed.
“It all leads to the importance of being inclusive and
making sure our words turn into actions. Inaction does
not bear thinking about. If we can meet the challenges
and opportunities before us, it will be to the benefit of
us all,” added Barkindo.
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R a m i r e z
In highlighting the importance his government attached
to countries having full sovereignty over their natural
resources, Ramirez stated that it was a process Venezuela
had now successfully achieved after years of much-
needed petroleum revenues being lost.
He said that re-establishing full sovereignty over the
management of the country’s petroleum resources had
proven to be tough, but necessary, considering the cru-
cial role oil played in supporting Venezuela’s develop-
ment possibilities.
The new policy, he explained, which involved the
introduction of new operating service contracts, with a
higher rate of tax for the government, encompassed both
the regulation of the extraction of oil in its capacity as a
natural non-renewable and depletable resource, as well
as the regulation of the industrial activities ancillary to
its extraction.
This policy did not exclude the presence of foreign
capital. However, for such a presence to be possible,
foreign investors had to respect the country’s sovereign
rights, stressed Ramirez.
“Foreign capital will be very welcome for as long as
it dedicates itself to the industrial activities, properly
speaking, in the pursuit of a reasonable and entirely
legitimate return, but always accepting, without reserva-
tions, the legitimacy of our own aspirations for a proper
remuneration for every barrel of this non-renewable and
depletable natural resource that is severed, once and for
all, from Venezuela’s subsoil,” he said.
The role of energy in developing
countries formed the basis of the
next address — delivered by Rafael
Ramirez, Minister of Energy and
Petroleum of Venezuela.
Ramirez said Venezuela’s experience in implement-
ing this process of full sovereignty was at the disposition
of other oil-producing developing countries.
He pointed out that it represented a valuable contri-
bution to strengthening their respective national policies
for the control and defense of their oil resources.
“Our own policy of full sovereignty over oil draws its
inspiration from the principles that gave rise to the foun-
dation and growth of OPEC,” said the Minister.
Ramirez said Venezuela believed that in going through
this experience there was also a message to be found for
the large oil-consuming countries and the multinational
oil companies — namely that there could not be stabil-
ity in the international oil market if there was not sta-
bility within the oil-producing countries, “which in turn
presupposes political and social stability, justice and a
truly national and fair distribution of the oil rent.”
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In beginning his address by commending OPEC for hold-
ing the seminar and establishing an important meeting
place for dialogue among key ministers, oil company
executives and energy experts, Walther pointed out that
‘era’ was a big three-letter word and the challenges,
opportunities and complexities of energy did not make
it any smaller.
“If we have already entered a new energy era, it would
seem to be an era of heightened energy consciousness
around the world, an era with uncertainties and an era
of increasing interdependency among nations,” he told
delegates.
Energy security, he observed, currently continued to
top the political agendas of energy-importing, as well as
energy-exporting, countries and for industrialized, as well
as developing, economies.
Walther maintained that global producer-consumer
dialogue, which the IEF was promoting, acquired increas-
ing importance as nations revisited and modified estab-
lished policies and shaped new ones in their quest for
such security in the years ahead.
He said that as the national and global focus was
now concentrating on issues of energy security, bilateral,
regional and inter-regional energy cooperation were also
being strengthened around the world.
“This gives additional impetus to the global energy
policy interrelationship. Parallel processes of global
and regional cooperation in a multi-polar energy world
can be mutually supportive when heading in the same
direction.”
Walther professed that the new energy era called for
a wider framework for producer-consumer dialogue and
the IEF was uniquely poised to facilitate this.
“I see great potential for the further development
of the IEF as a confidence-building process and a focal
point for enhanced producer-consumer relations. It is a
forum for on-going dialogue among parties across tra-
ditional political, economic and energy-policy dividing
lines, where ministers voice their national interests and
perspectives in the wider context of promoting common
global objectives as well.
“In this new era, I hope to see a myriad of new partner-
ships between governments and between governments
and industry, as well as innovative ways to realize win-
win opportunities. And, hopefully, we will see a code of
global conduct that is reasonable and advantageous for
all to follow,” he added.
The fourth speaker in this session
was Ambassador Arne Walther,
Secretary General of the International
Energy Forum (IEF) Secretariat, who
spoke on producer-consumer
relations in a new era.
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In referring to IMF data, Rato y Figaredo said the baseline
forecast was for a continued smooth ride for the global
economy, although “there were more clouds on the hori-
zon than there were a year ago.”
Concerning high oil prices, he said the impact on the
global economy so far had been moderate, in large part
because the higher rates had been accompanied by strong
demand for other commodities and goods and services
generally.
“Developing countries have also benefited from a
pick-up of other capital flows and workers’ remittances,
including from workers in the oil-producing countries, a
relatively strong initial international reserves position,
and for many, debt relief,” he said.
However, the IMF head warned that any sudden or
unexpected supply disruptions in the oil market could
have more adverse effects than have occurred up to now,
especially if they impacted on consumer and business
confidence.
Reducing imbalances in the oil market required an
orderly, predictable, and transparent market, he said,
with adequate data concerning supply and demand con-
ditions to enable investors to better understand future
production, consumers to respond to price signals in a
timely fashion, and prices to truly reflect the scarcity of
the resource.
Such an environment would also help reduce large
price swings associated with over- or under-investment,
said the IMF chief.
In addition, collective efforts could help to ensure
that strategies in producer and consumer countries were
mutually consistent. Because the oil market was a global
market, policy-makers needed to consider effects beyond
their country’s borders, he maintained.
Highlighting some of the policy challenges relat-
ing to the oil market, Rato y Figaredo said domestic fuel
prices in all countries should be set to reflect economic
and social costs and to promote an appropriate demand
response.
Secondly, adequate investment should be made
available in the oil sector — a situation that would help
alleviate concerns about future supply.
Thirdly, oil-exporting countries, particularly in the
Middle East, must rise to the challenge of finding the
appropriate balance between spending the increased
oil revenues on high-return projects that diversified their
economies and responded to pressing social needs, and
saving revenues for future generations.
In conclusion, he said: “We have a shared interest in
promoting economic stability and sustainable growth. The
challenge ahead, therefore, is for OPEC to work closely with
other multilateral organizations and the global community
to enhance the order and stability of the international oil
markets in support of continued sound economic growth.
“While we cannot expect, nor should we try, to smooth
out every fluctuation of oil prices, we can ensure that all
countries work to minimize the adverse impact they may
have on the global economy,” he added.
Rodrigo de Rato y Figaredo, Managing
Director of the International Monetary
Fund (IMF), gave the final address of
the first session. His speech looked at
prospects for the world economy.
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Session Two:
Oil production capacity expansion
The objectives of the second session were to present investment capacity expansion plans in the short-to-medium term, as well as investment needs in the long term; to highlight the uncertainties, in particular related to oil demand, that may affect the required level of upstream investment; and to discuss national oil company/international oil company cooperation.
In his own address before introducing the session’s other
speakers, Enoksen said few would disagree that global
oil production capacity needed to be expanded, both in
the short and long term and that increased spare capacity
was also required. For the last two to three years, reserve
capacity had not been sufficient to act as an effective
buffer against possible supply disruptions — one impor-
tant reason why prices had been so high.
“At $60–70 a barrel, crude prices pose a risk to the
global economy, although the impact on economic growth
so far seems to have been limited,” he stated.
Session Chairman was Odd Roger
Enoksen, Minister of Petroleum
and Energy of Norway.
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The minister said that in a context of high geopolitical
tensions and supply risks, a reserve capacity of a certain
size was a precondition for market stability.
In the long run, capacity must increase to meet the
growing demand for oil, particularly in countries like
China, India and the developing countries, he said.
Enoksen stated that current global oil production
was around 85 million b/d. In 2020, it needed to be at
least 20m b/d higher, according to forecasts from vari-
ous export sources.
This would require large investments in new capac-
ity to meet demand, as well as to sustain current capac-
ity because of natural decline rates. Perhaps as much as
75 per cent of upstream oil investment would be needed
just to counter a natural decline in production. Future
upstream investments thus needed to be much higher
than today, he affirmed.
Enoksen said that developments in the oil and energy
market in recent years had caused countries around the
world to reassess their energy policies and a number of
new energy measures were being discussed and imple-
mented.
Concern over energy security was forcing countries to
decrease their dependence upon oil, for instance by sup-
porting biofuels. Growing evidence of climate change was
also increasingly having an impact on oil and energy.
He said the oil-exporting countries needed to engage
and face the challenges new government regulations
represented, even if oil demand forecasts today might
be good.
“Oil exporters’ best guarantee for continued growth
in demand is to see that oil remains competitive in the
energy market with respect to price, security of supply,
and to environmental properties,” he maintained.
The keynote speaker for this session
was Dr Chakib Khelil, Minister of
Energy and Mines of Algeria, whose
address covered oil production
capacity expansion.
It was important to note, said Khelil, that global demand
for energy was clearly set to continue its robust growing
trend in the foreseeable future. It was also a consensus
view that oil was expected to maintain its leading posi-
tion in the world’s energy demand mix for this same
time horizon.
“According to OPEC forecasts, oil demand is set to
rise by 30m b/d over the next 20 years, reaching 113m
b/d by 2025, with transportation being the leading sec-
tor of future growth in such oil demand,” he stated.
Khelil maintained that the resource base was suffi-
cient to meet expected world oil demand growth.
Estimates of global ultimately recoverable reserves
for conventional oil had been increasing, due to such
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and enhanced recovery from existing fields.
He pointed out that non-OPEC oil discoveries were
not keeping pace with production and the average
size of new fields was falling. This would raise seri-
ous challenges for non-OPEC producers over the com-
ing years.
Khelil observed that the world’s spare oil production
capacity had declined steadily since the mid-1980s —
from about 15 per cent of global demand to two to three
per cent today. Lack of spare capacity had been one of
the key drivers behind rising prices in recent years.
OPEC Member Countries were addressing this chal-
lenge and it was expected that the Organization’s spare
production capacity would be at 3m b/d by the end of
this year and should reach some 5m b/d by 2010.
Khelil said that growth projections for the future under-
lined the need for substantial investment along the entire
hydrocarbons supply chain. By 2025, OPEC production
levels, including natural gas liquids, were expected to
rise to 54m b/d and, accordingly, total upstream invest-
ment requirements would be to the tune of $1.9 trillion
(in 2005 dollars).
The next address — on upstream
investment: strategic considerations
in expanding oil production capacity
— was given by Ali I Naimi, Minister of
Petroleum and Mineral Resources of
Saudi Arabia.
The production, consumption and trade in oil and gas, as
well as their vital role in the economies of both producing
and consuming regions, said Naimi, had shaped global
economic and energy relations for most of the 20th cen-
tury, and were expected to continue to play an important
role for many more years to come.
“The past three decades, however, have witnessed
structural changes in both world oil and gas supply and
demand patterns which have altered the face of the world
energy market in important ways,” he stated.
However, the level of output capacity required was
clouded in uncertainties surrounding future oil demand,
stemming from prospects for the world economy, con-
suming countries’ energy and environmental policies,
and technological developments.
Khelil noted that today’s high prices were contrib-
uting to record cash flows for exploration and produc-
tion companies. However, inflated service costs and the
declining size of discoveries were increasing risk capital
exposure and putting pressure on returns.
“New efforts are required to overcome the challenges
in today’s environment. They may force energy compa-
nies — the international oil companies, the national oil
firms and the independents — to join efforts to capitalize
on competitive advantages, such as expertise, operating
experience and technology,” he maintained.
Khelil asserted that such challenges may force energy
actors into forging joint efforts to look for ways to rein-
force dialogue between producers and consumers.
“Such dialogue should be widened and deepened to
cover more issues of mutual concern, such as demand pre-
dictability, security of supply, market stability, investment,
technology and downstream expansion,” he affirmed.
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He explained that oil demand in the OECD region,
which accounted for 70 per cent of global demand in the
1970s, had grown by an average of 0.7 per cent annually
since then, while demand from the emerging economies
in Asia and Latin America had expanded by an average
of four per cent.
This had resulted in an increase in the latter’s share
in global demand from 16 per cent in 1975 to 36 per cent
today.
During the same period, demand for natural gas
grew by an average of 1.7 per cent annually in the OECD
and 6.7 per cent a year in the developing countries, thus
altering the relative share of developing states in world
oil demand from eight per cent in 1975 to 26 per cent
today.
“The last 30 years also witnessed a change in the rel-
ative shares of the key consuming sectors of oil and gas,
as oil commanded the highest share in the transporta-
tion sector’s fuel demand, while gas increased its share
in the power sector’s fuel requirements,” he noted.
Naimi said that considering its availability, versatility,
competitiveness, proven end-use technologies and avail-
able infrastructure, oil was forecast to retain its leading
position in the world’s primary energy mix at 37 per cent
by 2025. Meanwhile, gas would increase its share to 30
per cent.
“Both fuels combined are expected to account for
two-thirds of global energy consumption and more than
85 per cent of global energy trade by 2025,” he said.
The Minister said that considering global economic
uncertainties, the future shape of the world economy
would have a tremendous impact on energy demand in
general and on hydrocarbons demand in particular.
“While the world does need continued improvements
in energy efficiency, some government policies, which arti-
ficially curtail demand and create demand uncertainties
irrespective of market signals, will have economic rami-
fications that could jeopardize the global energy future,”
he asserted.
Naimi stated that future opportunities and undertak-
ings in the petroleum sector posed numerous political,
economic, technological and managerial challenges.
“We recognize that the future of these investments
and their returns depend on a healthy global economy,
especially in the emerging nations that will account for the
largest share of incremental growth in energy demand.
“Conversely, such investments are also necessary for
the health of the world economy, which relies so heavily
on a stable, reliable supply of hydrocarbons,” he said.
Naimi pointed out that the appreciation of this
“dynamic of interdependence” guided Saudi Arabia’s
policies and should also shape those of other energy
stakeholders, whether consuming governments, inter-
national lending institutions, the industry at large, or
international energy organizations, such as the IEA, the
IEF and OPEC.
“Recognizing that greater cooperation and coordi-
nation are indispensable elements of our energy future
is the first step in making that vision of shared progress
and prosperity a reality,” the Minister added.
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Unrelenting demand, particularly in Asia, was likely to sus-
tain current high oil prices, Kupolokun maintained.
“Significant production capacity growth is imperative
if more moderate prices are to be realized,” he maintained.
OPEC Countries dominated the world’s remaining
crude reserves, most of which were managed by national
oil companies (NOCs), who would continue to play a major
role in meeting future capacity requirements.
“However, meeting this will require cooperation with
the international oil companies (IOCs),” said Kupolokun.
He said Nigeria had seen steady growth in its oil
reserves, which had translated into steady growth in its
production capacity. By the end of 2006, over 500,000
b/d would be added to global crude oil capacity from
Nigeria.
Kupolokun said that, going forward, four new chal-
lenges confronted the NNPC and the IOCs in Nigeria. These
involved addressing the economic empowerment and
growth issues of host communities to mitigate against
supply disruptions; satisfying increasing demands from
the Nigerian people for a visible contribution from the oil
and gas sector to national economic growth; increasing
technological challenges associated with finding new oil
and gas, including the challenge of developing the requi-
site skills and capabilities to support the required capaci-
ties; and meeting the huge funding challenge associated
with rapid capacity development.
“These challenges call for a revisit on the anchors of
cooperation. A more strategic approach to cooperation
will be required to overcome some of the challenges,” he
said.
The NNPC head said that, increasingly, the explora-
tion focus in Nigeria was shifting to the country’s deep-
water. However, technology and robust skills and capa-
bilities would be required by the NNPC to realise the full
potential of these areas, he said.
“Unlocking the vast potential in the deepwater fields
requires cooperation that enables effective transfer of
technology from the IOCs to the NOCs in the four key
areas stated above,” he said.
Funsho Kupolokun, Group Managing Director of the Nigerian
National Petroleum Corporation (NNPC), gave the next address.
His speech looked at oil and gas cooperation between national oil
companies and international oil firms.
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Firstly, said De Margerie, it was important to find new ways
to go along with the new energy era and its challenges,
which he referred to as “a revolution”.
He said the current environment was not necessarily
“gloomy”, just different, with many new challenges.
“The world is not as nice a place as we would like it
to be. We have to adopt different attitudes to this differ-
ent environment,” he maintained.
De Margerie said that against a worrying geopoliti-
cal background, it was vital for the producers to restore
confidence in their common ability to deliver reliable oil
production.
“There is a lack of confidence in the consuming coun-
tries that we can supply the oil they need — even though
we have the reserves,” he stated.
De Margerie said that all sides must work together
to ensure that oil prices were sustainable for the
economies of both the producing countries and the
consumers.
In addition, he said, the petroleum industry must
reduce competition and make more new partnerships.
The IOCs were developing new reserves using the
breakthrough technologies available, but he stressed
that they must share this technological expertise and
their research and development techniques — “not keep
them to themselves”.
“We all need to move together,” he maintained.
Another worrying trend, said De Margerie, was the
increase in costs the industry was facing. Services indus-
tries were today having to pay 50 per cent more to carry
out their activities, with some projects costing 300 per
cent more to complete.
“There is also a shortage of good, experienced peo-
ple in all areas of the services sector. This is a real prob-
lem and we need to attract more experienced personnel.
At the same time, the number of good services firms is
dwindling in number,” he said.
“We all face tough new challenges … which need to be
addressed in common,” he said. “We want to improve our
relationship with the NOCs — to go beyond what we have
achieved in the past. It is a case of confidence, based on
mutual understanding and respect,” he added.
The second session’s next speaker
was Christophe de Margerie,
President of Exploration and
Production at Total, whose address
looked at petroleum investment,
as seen from the perspective of an
international oil company.
Kupolokon said that over $60 billion was required by
2008 to deliver Nigeria’s capacity aspirations.
“This level of investment requires innovative and
structurally more complex arrangements beyond tradi-
tional joint-venture cash calls,” he affirmed.
Under the government’s National Content Agenda, a
framework had been provided for the NNPC and the IOCs
to facilitate the development of an economic environ-
ment that could flourish and sustain continued capacity
growth.
In pursuit of this, the NNPC was now working with the
IOCs to develop even more structured ways of funding,
disclosed Kupolokun.
“Strategic NOC/IOC cooperation is a continuing jour-
ney for us in Nigeria. Significant learning lies ahead,” he
added.
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In preparing the energy agenda for the G8 summit,
Zhiznin explained that two basic questions were dis-
cussed – what were the global energy challenges, and
what kind of response should the international com-
munity prepare?
He said many important statements were made at
the gathering concerning energy security. These covered
several major topics, including oil transparency and pre-
dictability, the investment climate, energy efficiency and
saving, the diversification of the energy mix, securing
critical energy infrastructure, energy poverty, and climate
change and sustainable development.
He said that following the summit, the Russian author-
ities were now preparing a programme that would deter-
mine the country’s contribution in implementing the so-
called St Petersburg action plan.
The Russian government also expected G8 experts
to prepare reports on some of the topics that had been
mentioned.
“I hope that energy security will not disappear from
the agenda of the G8 in the future and, in different ways,
will appear next year when Germany will have the presi-
dency,” he said.
Concerning Russia, he said on the one hand it was a
major G8 consumer, where the basic interest was to have
The final speaker of this session
was Dr Stanislav Zhiznin, Senior
Counsellor of the Department of
Economic Cooperation at the Russian
Ministry of Foreign Affairs, who
deputized for his country’s Minister of
Industry and Energy Victor Kristenko.
He gave a brief overview of the G8
Summit in St Petersburg, which was
held during Russia’s G8 Presidency.
This had global energy security as its
key topic.
regular supplies of petroleum guaranteed and at reason-
ably low prices.
However, on the other hand, he said, Russia was a
major producer and exporter of petroleum.
Zhiznin pointed out that these two concerns meant
that the country was interested in both security of sup-
ply and security of demand.
“This explains the logic of our international energy
policy, whereby we are developing relationships with
OPEC, the IEA and the IEF,” he said.
Zhiznin said his country very much appreciated the
help experts from those organizations had given in pre-
paring the G8 summit energy agenda.
He said that, as for Russia, it would continue to
develop its relationships with the three organizations.
Energy security was also the key issue for discussion
in its bilateral energy meetings with the consumers,
such as the EU, and countries like France, Germany,
the United Kingdom, Italy, the US, in addition to Asian
states, particularly China, Japan, India and South
Korea.
“We are also producing energy relationships with pro-
ducer countries, including OPEC Members Saudi Arabia,
Venezuela, and Algeria, as well as independent produc-
ers, such as Norway and Mexico,” he added.
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Luncheon hosted by the Kuwait Petroleum Corporation
Abdallah S Jum’ah, CEO of Saudi Aramco.
Sheikh Nawaf Saud Nasir Al-Sabah,
Deputy Managing Director and
General Counsel, KPC.
Day 1
Luncheon hosted by Saudi AramcoDay 2
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Session Chairman was Mohamed Bin
Dhaen Al Hamli, Minister of Energy of
the United Arab Emirates (UAE).
Before handing over to the panel speakers, Al Hamli made
some comments on the state of the global refining sector,
stating that, in the past few years, considerable pressure
had been exerted on oil prices as a result of inadequate
refining capacity. This had led to serious bottlenecks in
product supply.
He explained that, over the years, poor financial
returns, as a result of relatively low and volatile refining
margins, had reduced investors’ willingness to invest in
bringing new plants on-stream.
Session Three:
Downstream challenges and opportunities
The objectives of the third session were to highlight the role and importance of the downstream, and in particular the refining industry for market stability; to discuss the current situation, as well as the prospects of the downstream sector and in particular whether the current bottlenecks may ease in the future, globally and by region; and to highlight the impact of environmental regulations and fuel specifications on the downstream business.
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Moreover, said the Minister, since the early 1990s,
increasing environmental concerns had forced refiners
to make investment in meeting tighter product specifi-
cations — rather than expanding processing capacity to
keep pace with oil demand growth.
He said that, in the coming decade, several factors
would have a bearing on developments in “this vital
sector”.
Firstly, a rising volume of crude oil would need to
be refined as demand increased. Many NOCs and IOCs
had responded to the situation in announcing substan-
tial refining projects, but the current tightness in refin-
ing capacity would not change considerably any time
soon, due to the long construction lead times of the
schemes.
“In fact, if current demand projections materialize, we
may not see any significant relief for four or five years,”
maintained Al Hamli.
Secondly, said the Minister, refiners would also have
to face up to continuing moves towards the requirement
for lighter products. In the next decade, a shift was
expected to occur in the demand structure, whereby con-
sumers would require more light and middle distillates.
“From a current perspective, unless additional invest-
ment is made in this area, by the year 2010 a deficit of
around 1 million b/d of conversion capacity will appear,
putting further pressure on the refining sector as a whole,”
he warned.
Al Hamli said that in tandem with this transition, the
refining industry would also have to address demands
for its oil products to be cleaner — which meant mak-
ing a substantial reduction in their sulphur content,
as well as incorporating improvements in other qual-
ity parameters.
“There will be no escaping these demands, as envi-
ronmental concerns continue to gather pace,” contended
the Minister.
He said that for all of this to come to fruition, in the
years ahead, the refining sector would require significant
investment, running to many billions of dollars.
Al Hamli added that OPEC Member Countries,
although customarily mainly involved in upstream
operations, were also investing in bringing more refining
capacity online, in a bid to help relieve the bottlenecks.
Mohamed Bin Dhaen Al Hamli (l), UAE; and Claude Mandil, IEA.
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Alongside strong economic growth and concerns in
the upstream sector, Mandil said, the downward trend
seen in limited oil refining spare capacity had been
responsible for helping to push oil prices to their cur-
rent high levels.
“For a very long time we enjoyed a large spare capac-
ity in refining. Now it is very small — we are very close to
full capacity,” he said.
This had been due to the fact that insufficient invest-
ment had been made in refining, which was largely as a
result of the lower oil prices seen in the past.
Mandil said that, based on current projects and plans,
the level of spare crude production capacity should rise,
although the quality of the incremental crude would
have important implications for the refining industry and
product markets.
He forecast that growth in refining capacity was set to
trail that of oil demand until 2009 and then improve. The
bulk of new capacity would be in the Middle East and Asia.
Current investment plans in upgrading capacity indi-
cated that the gasoline and distillate supply capability
should improve over the next few years. Most of this
investment was focused in the United States and Europe,
he said.
Mandil pointed out that meeting increasingly strin-
gent fuel quality specifications as crude quality deterio-
rated would require ongoing investment.
“Global harmonization of standards would be an
effective trade enabler,” he affirmed.
Demand for transport fuels would drive oil demand
globally. In Europe and Asia more and more vehicle fleets
would convert to diesel fuel, clearly impacting on inter-
regional trade, he forecast.
Mandil said that in the longer term, refiners would
need to continue to adapt to policies introduced in
response to environmental, economic and energy
security concerns, aimed at increasing energy effi-
ciency, reducing demand growth in the transport sec-
tor, and promoting development and deployment of new
technology.
“Given this uncertainty, governments must provide
refiners with regulatory certainty,” he said.
Mandil noted that the major producing coun-
tries would play an increased role in refined product
markets.
“Thus, the need for enhanced producer-consumer dia-
logue on downstream issues is made even more impor-
tant,” he maintained.
The keynote address for this
session was delivered by
Claude Mandil, Executive
Director of the International
Energy Agency (IEA), who
spoke on the outlook for the
downstream sector.
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Based on conservative estimates, Ghanem said that con-
ventional wisdom dictated that higher oil prices would
lead to a slowdown in the world economy and even cause
a severe economic recession, which in turn would lower
oil demand and drive oil prices back down.
“However, this did not happen in the current situa-
tion as the world economy seems to have been unaffected
by rising oil prices and the oil market has continued to
function under the influence of growing oil demand and
volatile prices,” he said.
However, with so much uncertainty, long-term invest-
ment planning in both the upstream and downstream may
prove to be a quite formidable task for all concerned par-
ties — producers and consumers alike, he stated.
Highlighting the present downstream bottlenecks,
Ghanem said the current tight refining capacity was not
something that occurred overnight.
For many years, it had been observed that global
refining capacity was becoming increasingly inadequate,
in terms of both distillation and conversion capacity —
mainly because the refining industry, particularly in the
United States and Europe, had not been investing enough
in new projects.
He pointed out that the US had not built a new refin-
ery in about three decades, while for Europe it was about
two decades. In fact, in the US, the number of operating
refineries had decreased by 50 per cent since the 1980s,
with a similar situation seen in Europe.
Ghanem said that recently, however, as a result of
higher oil demand and prices, there had been a marked
improvement in both refining margins and capacity
utilization rates — and hence a marked improvement in
profitability.
“Refining margins, which had been persistently low
for decades, have increased substantially over the past
two years with complex plants enjoying the best margins
and economic returns,” he noted.
In addition, most refineries around the world had
increased their utilization rates significantly. In the US,
plants had been running near 100 per cent of capacity,
while the average utilization rate worldwide today was
about 90 per cent.
“Even though the refining industry is currently oper-
ating under pressure of tight spare capacity, it is enjoy-
ing some of its finest days in terms of improved margins
and capabilities,” he observed.
Ghanem noted that this better performance seemed
to be encouraging fresh investment in new conversion
and distillation capacity.
However, he warned that in the future a move towards
a need for lighter products, coupled with specifications
for cleaner products, could greatly affect the state of the
refining industry.
There were also questions to be answered as to how
much capacity would be needed, what type, where to
build it, and who should build it?
Ghanem said that world demand for oil products was
expected to grow substantially with the transportation
sector being the driving force behind the need for more
conversion technology to produce cleaner fuels.
This new capacity, he said, must come onstream in a
timely manner. The refining industry must also be able to
meet the new standards that would be expected, which
would mean utilizing the appropriate technology.
“Consuming countries, the IOCs and the oil-producing
countries must all invest in additional refining capacity,
which should preferably be built in the consuming coun-
tries,” he said.
However, added Ghanem, if some of the additional
refining capacity was built in the oil-producing countries,
the consuming nations and the IOCs should secure the oil
demand and most, if not all, of the investment required.
(See also interview with Dr Ghanem on p72).
Dr Shokri Ghanem, Chairman of the People’s
Committee, National Oil Corporation (NOC), of
Libya gave the next address. His speech looked
at investing in the downstream from the point of
view of a national oil company.
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broadening supply sources and reducing consumption;
focusing more on domestic energy development; achiev-
ing an energy structure with coal as the main part, electric
power as the core and oil, gas and new energy sources
developing simultaneously; protecting the environment;
and furthering international cooperation.
“Global energy security is crucial to the economic
growth and people’s livelihood of all countries … yet few
countries can achieve energy security without joining in
international cooperation. The Chinese government is
prepared to work responsibly with the rest of the word
to ensure global energy security,” stated Tang.
He said it was important to strengthen dialogue and
cooperation between energy exporters and consumers
and among major energy consumers and it was vital to
put in place a system for research and development and
an extension of advanced energy technologies.
In addition, it was important to maintain a favourable
political environment for energy security and stability.
“We should join hands to safeguard the stability of
energy-producing countries and regions, and ensure secu-
rity of international energy channels. Energy issues should
be solved through dialogue and consultation, instead of
politicizing the energy issue,” he maintained.
“OPEC is a major force in stabilizing the world oil
market. China is ready to enhance its cooperation with
OPEC Member States and other countries or regions of
the world. China is looking forward to moving into a new
era of comprehensive, mutually beneficial and diversi-
fied international energy cooperation,” he added.
China, said Tang, was one of the world’s largest energy
producers, as well as energy consumers. It was the world’s
largest producer of both coal and hydropower and the
sixth biggest oil producer.
Since 2002, healthy and robust economic growth
had been responsible for a dramatic increase in domes-
tic energy demand. Industries such as transportation and
petrochemicals had boosted demand for oil.
In the light of this, the Chinese government had imple-
mented a series of measures to increase production and
improve energy efficiency.
China, said Tang, had made large investments in the
downstream industry aimed at expanding its oil refining
capacity and the government attached great importance to
opening up the industry to international cooperation. As
of the end of 2004, more than 20 countries were involved
in China’s onshore and offshore upstream activities under
200 contracts.
He noted that OPEC Member Countries were the
main source of China’s oil imports. Chinese oil firms
PetroChina, SinoPec and CNOOC had participated in oil
and gas exploration and development activities in OPEC
Countries, including Venezuela, Algeria, Libya, Nigeria,
Indonesia, Iran, Iraq and the UAE.
Tang said that Saudi Aramco and a Kuwait firm
planned to build joint refineries with China and were
exploring the possibility of building petroleum storage
facilities in China.
The Chinese government had outlined a number of
fundamental principles for the next five years, including
The next speaker was Guoqiang Tang,
Ambassador and Permanent Representative
of China to the International Organizations
in Vienna, who spoke on the current energy
situation and future energy policy in China.
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In remarking that the OPEC seminar was the right kind of
initiative for helping to meet the energy challenges of the
world, van der Veer said that the overall challenge was
actually quite simple — “we need more energy with less
environmental impact.”
However, he stated that in conducting its affairs, the
industry had to contend with a complex world and a very
volatile market.
“If we look just at the downstream, we have to con-
sider such challenges as tightening specifications, a shift
from gasoline to diesel, and changes in product needs,”
he said.
Van der Veer maintained that, for the future, it was not
about having a good upstream and a good downstream,
but the art of how to integrate both upstream and down-
stream activities.
Looking at future projections, he stated that oil
demand could increase by between 20 and 30 million
b/d in the coming decades.
“This will mean that the industry will have to have
new distillation capacity and new upgraders to process
the heavier crude that plants will increasingly have. In the
coming years, we expect 11m b/d of new refining capac-
ity to come onstream,” he said.
Van der Veer said Shell was investing $20 billion a
year in upstream and downstream activities.
Looking back, he said for decades the refining industry
was a very difficult business, where it was hard to make
any profit.
“Only in the last two years have we seen a relatively
good refining industry with margins three times the aver-
age seen over the last ten years,” he affirmed.
“But does this two years mean we have entered a
‘golden age’, which will last for many years to come? I
don’t think so,” he added.
Van der Veer said the refining industry would be cycli-
cal, and no one really knew when the cycles would hap-
pen.
The other question to be answered, he said, was “what
would the high oil price do for oil demand?” The expected
shift from gasoline to diesel and a further tightening of
product specifications would not only have an impact on
downstream investment, but on the whole downstream
sector. One also had to consider the future of biofuels.
“All this means that companies will have to be care-
ful in making their future investments,” he maintained.
However, van der Veer contended that, despite all
the innovations in the future concerning the makeup of
transport fuels, including gas-to-liquids and biofuels,
“we consider that in 2025 still more than 90 per cent of
all transport fuels will be gasoline and diesel.”
He stated: “The other fuels will be important, but there
is a traditional marriage between gasoline and diesel for
transport fuels, which will continue.”
Van der Veer said that with the forecast increase in
global oil demand, the industry had to make sure that
governments had the right frameworks in place for invest-
ment to take place.
“The better the frameworks, the sooner the invest-
ment will be made available,” he said.
Jeroen van der Veer, Chief
Executive Officer of Royal Dutch
Shell, gave the next address.
His speech covered investing
in the downstream and
midstream.
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Convening the OPEC seminar, Bartenstein stressed,
was of great importance, particularly at a time when
global demand was increasing rapidly, despite energy
efficiency improvements and major new oil discoveries
becoming rarer.
He said that through exchange of information and
policy views, it was important to continue to develop
concerted approaches “in our efforts to promote national
and global energy security — both on the demand and
supply side — and to address the links between energy,
the environment and economic development.”
Bartenstein said the EU-OPEC Energy Dialogue, which
was launched in 2005, had been very fruitful and prom-
ising.
“I hope we can deepen this dialogue and establish
a real partnership for several common projects. I hope
it will continue to the mutual benefit of both sides,” he
said.
The minister noted that widespread analysis showed
that fossil fuels would continue to dominate energy sup-
ply in the future, meeting more than 80 per cent of the
projected increase in primary energy demand. Oil would
remain the dominant fuel, although gas would continue
its increase in the mix.
However, rising global energy consumption meant ris-
ing carbon dioxide emissions, which, said Bartenstein,
called into question long-term sustainability of the glo-
bal energy system.
“Developing countries will be responsible for three-
quarters of the projected increase in carbon dioxide emis-
sions, overtaking the OECD region early in the 2020s.
Kyoto, therefore, is more than ever needed, but on a
worldwide basis, taking into account the emissions of
all countries,” he maintained.
The minister said that the EU was currently the number
one importer of energy and the number two user. The
share of its imports would rise from 50 per cent to about
70 per cent in 2030.
“We need to diversify our energy sources, our import
countries, and our routes of transportation,” he said
Bartenstein said that in response to the challenges,
the EU’s Green Paper on Energy, released earlier this year,
represented a new era for energy policy in Europe.
“The EU has decided that a stronger and more inte-
grated approach is needed, involving all the aspects of
trade, agriculture and the environment. Energy, indeed,
is a global issue, and we have to face the problems of
security of supply, competitiveness, and combatting cli-
mate change — these all have to be solved at a global
level,” he said.
“Our energy system should be based on effective
collaboration between producers and consumers. Efforts
should be made to increase energy efficiency, and to
expand the use of renewables and low-carbon energy
sources worldwide,” he added.
Bartenstein said the strengthening of energy dia-
logues between the EU and its main global partners, be
they producer, transit, or consumer countries, and in syn-
ergy with relevant international organizations, formed a
main part of the EU’s energy policy.
The final speaker of the third
session was Dr Martin Bartenstein,
Minister of Economics and Labour
of Austria, whose address covered
the challenges to energy policies
— the case of Europe.
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Ms Sandrine Dixson-Decleve, Executive Director Europe and Africa, International Fuel Quality Centre.
Mark Gordon, Vice President, Portfolio Manager, Goldman Sachs.
Dr Usameh Jamali, OAPEC.Professor Thomas Wäldefrom CEPMLP/University of Dundee.
Answering some of the questions were (l-r) Jeroen van der Veer, Royal Dutch Shell, Mohamed Bin Dhaen Al Hamli, UAE; and Claude Mandil, IEA.
Question time ...
Dr Adnan Shihab-Eldin,former Director, OPEC Research Division.
The floor was open to questions at the end of each session.
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Day 2 September 13, 2006
Session 4:
Role of petroleum technology advances
The objectives of the fourth session were to discuss advances in oil and gas upstream technologies; to highlight technology advances and their impact on demand, particularly in the transportation sector; and to emphasize the role of technology in the protection of the environment.
Before introducing the panel speakers, Canales spoke
briefly on technological advances in the petroleum indus-
try, stating that the oil industry had traditionally been
dependent on technological development to maintain
its economic competitiveness.
Numerous technological breakthroughs had been
made over the years. The result was that petroleum
had irreversibly changed the way people lived and had
Session Chairman was Fernando
Canales Clarond, Secretary of Energy
of Mexico.
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The petroleum industry, said Caruso, had long been a glo-
bal industry, so technological improvements had rapidly
spread throughout the world.
These technological advances affected all sectors of
the energy market. Improvements in end-use technolo-
gies reduced fuel consumption, while improvements in
petroleum supply/production technologies both reduced
the costs of finding and delivering energy and expanding
the recoverable resource base.
“The latter’s impact is evident in the development
and production of deep-water petroleum resources in
depths that were unimaginable 30 years ago and in the
development of unconventional oil resources, such as
Canada’s oil sands,” he noted.
Caruso said technological advances supported
increased economic activity because they reduced
the cost and availability of energy to an economy and
increased productivity.
“Technological advances are expected to continue,
although the specific advances and their timing are hard
to predict,” he affirmed.
Caruso said most technological progress was incre-
mental — but small improvements resulted in large
advances over time. Technological progress was often
intangible, for example concerning new knowledge and
new management techniques, and progress often origi-
nated outside the petroleum industry, as seen in improve-
ments in computer equipment and software.
Major technological developments and opportuni-
ties were on the horizon concerning oil and natural gas
supply, transportation, the industrial markets, and power
generation, he maintained.
Concerning oil and natural gas supply, Caruso said
there would be improved pinpointing and discovery of new
resources, particularly at lower depths, both onshore and
offshore. Drilling costs would be reduced as new tech-
niques were utilized to drill in previously uneconomic or
ultra-deep areas.
In the transportation sector, he said, the develop-
ment of new technology would increase efficiency and
reduce costs, while in the industrial markets most effi-
ciency gains would be due to process improvements,
rather than breakthroughs or new technologies.
Power generation would benefit from fuel cells, new
materials to enhance the efficiency of turbines, break-
throughs in photovoltaic technology, and new technolo-
gies to economically capture and sequester carbon diox-
ide emissions, he added.
“Many of the technology improvements involve
the use of existing technologies in more efficient ways.
Identifying specific breakthroughs is impossible, but
advances are likely to be made,” he added.
generously fed the best period of prosperity mankind
had ever experienced.
For example, he said, in recent years this technologi-
cal progress had made it possible to go even deeper in
water exploration and production. He pointed out that
environmental, social and political issues were playing a
growing role in helping to find more ways to make petro-
leum operations more environmentally friendly. The near
future, he added, was already posing a clear technologi-
cal challenge.
“If we are to prevent increasing supply tightness
and to remove uncertainty, new funding and risk-sharing
schemes with matching investment will be necessary,”
he maintained.
The keynote speaker for this session
was Guy Caruso, Administrator of
the United States Energy Information
Administration (EIA), who spoke on
the impact of petroleum technology
advances on energy markets in the
long term.
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Over the last century, commented Jum’ah, the petro-
leum industry had been remarkably successful in find-
ing oil reserves, producing them, and delivering them
to market.
“Our success has powered tremendous global eco-
nomic growth and an unprecedented rise in living stand-
ards around the world. But we cannot afford to be com-
placent, nor can we attempt to overcome tomorrow’s
challenges by using yesterday’s solutions,” he said.
Therefore, advanced technology would be critical “if we
are to satisfy ever-increasing global demand for petroleum.”
Jum’ah said that in his view, there were five “tech-
nology targets” to reach that would help producers meet
their long-term responsibilities as energy providers.
The first target was finding new oilfields, in order
to increase the world’s conventional oil resource base.
Current estimates of total oil in place ranged between six
and eight trillion barrels, but historically the industry had
been rather conservative with projections of oil in place
and proven reserves, he said.
“As technology has advanced and our understand-
ing of petroleum geology and reservoir behaviour has
increased, both numbers have grown steadily over time,
whether at the level of individual fields, or in terms of glo-
bal reserves,” he noted.
Jum’ah said he would like to challenge the explora-
tionists to find enough new resources to add another one
trillion barrels to world reserves over the next 25 years.
The second target, he said, was to leave the minimum
amount of oil in the ground, while maximizing ultimate
recovery from known fields. Although recovery rates in
individual oil fields varied widely, overall they continued
to rise through the application of new technologies and
better reservoir management techniques.
“And so, I would again like to raise the stakes for our
upstreamers — by challenging them to increase incremen-
tal recovery rates for existing fields by 20 per cent in the
next quarter century, thereby adding another trillion bar-
rels of oil to the world’s reserve base,” he said.
The third technology target involved reducing explo-
ration and production costs and making previously une-
conomic prospects viable and attractive for investment,
said Jum’ah.
“This is a vital objective, as the industry’s search for
additional reserves and production shifts to more chal-
lenging areas,” he said.
He stated that enhanced oil recovery technologies
could prolong production and increase recovery rates. Since
today’s healthy price environment made the use of these
higher cost applications more attractive, the prospects
for additional advancements in the future were excellent.
The next technology target involved non-conventional
heavy oil resources, which Jum’ah put in two groups — the
first consisting of extra-heavy oil, tar sands and bitumen,
and the second made up of oil shales.
“Here I would like to propose a stretch goal of utiliz-
ing technology to add between one and two trillion bar-
rels of oil to producible global resources. Reaching that
target will not be easy, given the issues surrounding these
non-conventional resources …but that’s what technology,
innovation and ingenuity are all about, and our industry
boasts those attributes in abundance,” he maintained.
The fifth technology target underscored each of the
other four and concerned lightening the environmental
footprint of the industry’s activities, and products.
“As in other aspects of our business, technology
development has an important role to play in environ-
mental protection and the preservation of natural eco-
systems,” said Jum’ah.
In conclusion, he added: “Make no mistake, the future
success of our industry — and with it our ability to meet
future energy needs — will depend to a large extent on
our continued ability to push the envelope of technology.
Working together and tapping the remarkable talent and
instinct for innovation that characterize our business, I
am confident that our companies can, and will, achieve
that target.”
The next speaker in this session was Abdallah S
Jum’ah, President and Chief Executive Officer of
Saudi Aramco, whose address looked at the impact of
upstream technological advances on future oil supply.
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When it came to the development of petroleum tech-
nologies, Tillerson said he would suggest that OPEC and
the world energy community as a whole were not enter-
ing a new era.
“With all due respect to many who have said other-
wise, the era of easy oil is not over. Why? Because there
never has been an era of easy oil. Our industry has con-
stantly operated at the technological frontier. Oil only
seems easy after it has been discovered, developed and
produced,” he professed.
Understanding this fundamental fact was essential
for creating and sustaining the conditions for future tech-
nological progress, said Tillerson.
He said OPEC was destined to play an important and
growing role in meeting future energy demand. And to
reach the needed levels of production worldwide “we
must continue to innovate.”
Fostering innovation would require free trade and
investment, open access, and international partnerships,
he maintained.
“Oil producers need consumers — and oil consumers
need producers. Under these conditions of energy inter-
dependence, industry can continue to develop, transfer
and apply the energy technologies needed to support
economic growth and social progress in OPEC Member
Countries and beyond,” he affirmed.
Tillerson stated that technological progress in the oil
industry was never an overnight phenomenon and the
subject rarely made headlines. It resulted from an incre-
mental process involving consistent investment and the
application of scientific, engineering and managerial
expertise over sustained periods of time.
“In the end, this evolutionary process can have rev-
olutionary results that dramatically improve our energy
future,” he said.
“The projects our industry undertakes span decades,
require massive investments, and utilize cutting-edge
technologies that evolve throughout project life-cycles.
Under these circumstances, long-term planning is criti-
cal — planning which looks beyond the current business
cycle and which relies on stable frameworks.
“We must strive to strengthen our energy interdepend-
ence by fortifying our partnerships, freeing market forces,
expanding access, and sustaining investment. Unless we
do this, future technological progress and, ultimately, the
energy supplies that fuel economic progress, are jeop-
ardized,” he argued.
“The new era we face, like all of its previous ones, is
not an era of easy oil. Nor will it be an era of easy answers.
The supply and demand challenges we face are signifi-
cant. But as has been this industry’s history, it can be an
era of continued technological advancement if we com-
mit to the investment and interdependence essential to
innovation,” he concluded.
Rex W Tillerson, Chairman and Chief Executive
Officer of ExxonMobil, was the next guest
speaker. He spoke on evolution or revolution in
petroleum technologies.
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Against a background of rising energy demand, Appert
noted that the global transportation sector was fore-
cast to see more than 80 per cent growth over a 30-year
period.
Such a technological response to the higher energy
use expected would have to take into consideration long-
term energy supply and an increasing awareness for envi-
ronmental protection, which meant finding concrete and
lasting answers to global climate change, he said.
Ways of reducing harmful carbon emissions would
need to include better energy efficiency, particularly in
buildings and industrial operations.
Appert said a lower carbon energy mix would inevi-
tably look to more use from the cleaner-burning natural
gas and the development of biofuels.
Reducing the energy carbon content in power gen-
eration would also likely involve more use of natural
gas, as well as nuclear power and renewable sources of
energy.
Concerning carbon capture, transport and storage,
Appert said this was already an industrial reality, but a
more integrated approach was needed. Large initiatives
at both a European and international level existed.
He said future progress in technological advan-
ces would require well-focused research and devel-
opment programmes and heightened international
collaboration.
The next presentation was made by Olivier
Appert, Chairman and Chief Executive Officer
of the Institut Français du Pétrole, who looked
at the technological response to climate
change.
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Even given existing technology, maintained West, oil pro-
duction capacity would struggle to meet world demand in
the years ahead and there would also be a growing gap
between global demand and non-OPEC supply.
Policies and advancement of technologies in the
transportation sector — a large and growing component
of demand — were crucial to balancing the world’s energy
future, he asserted.
West said that rapid growth in automobile use in the non-
OECD region could lead to a greater impact on technology
advances and the early-adoption of more efficient vehicles.
The final speaker in this session
was Robin West, Chairman
of PFC Energy, who spoke on
policies and technology in the
transportation sector.
The US administration and other governments would
be called on to play a major role in supporting research
and development for more advanced fuel and transporta-
tion technology, which would likely be often carried out
jointly with the private sector.
West stressed that environmental issues and regu-
lations would become increasingly intertwined with fuel
and transportation technology.
Demand-side policies could be more rapid and
efficient than supply-side technology policies, he
pointed out.
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Session Five:
Petroleum and Sustainable Development
The objectives of the fifth session were to review the prospects for sustainable development and progress in implementation of the Millennium Development Goals; to discuss the important role that energy in general, and petroleum in particular, plays in the quest for sustainable development; and to highlight the role of development funds.
Session Chairman was José
Antonio Ocampo, Under-
Secretary General for Economic
and Social Affairs at the
United Nations.
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Before introducing the panel speakers, Ocampo spoke
on the importance of energy to sustainable development,
stating that, over the last two years, the world had seen
renewed interest in energy and its contribution to socio-
economic development, as well as a more intense focus
on the environmental aspects of energy use.
World leaders at the 2005 UN Summit recognized that
promoting clean energy and tackling climate change were
interconnected challenges that must be approached in
the wider context of sustainable development. They also
stressed that access to energy facilitated the eradication
of poverty, he said.
Energy was also in the spotlight regarding the
deliberations of the UN Commission for Sustainable
Development, he observed.
Ocampo said the comprehensive character of sus-
tainable development required consideration of at least
three dimensions — social progress, economic develop-
ment, and environmental protection.
Concerning social progress, he said there was now
broad consensus that access to modern energy serv-
ices was important for achieving all the UN Millennium
Development Goals, especially poverty alleviation.
He noted that the investments required to bring elec-
tricity, LPG, kerosene and improved transport systems to
the poor was a fraction of the total investments needed
for energy infrastructure in developing countries “yet all
stakeholders must ensure that this socially-essential
aspect of the broader investment is duly undertaken and
financed.”
Ocampo said that, excluding transport, total required
investment in energy infrastructure from now until 2030 in
the developing countries was estimated at $8 trillion.
He said it was widely recognized that fossil fuels,
especially oil, would continue to play a significant role in
the energy mix for some time. Exploration, development
and investment in oil and gas and other energy resources
were needed to meet the projected rise in demand growth
in the years ahead.
Ocampo said the higher oil prices seen of late had not
resulted in a significant contraction in the world economy,
but less volatile prices would help to reduce uncertain-
ties surrounding investment decisions and also stimulate
investment, not only in oil and gas, but in energy efficiency
and advanced and cleaner energy technologies.
Turning to the environmental issue, he said that
although greenhouse gases were to a great extent attrib-
utable to developed countries, the expected growth in
energy use by developing states would contribute sig-
nificantly to future emissions.
“We have come some way in the past few decades in
implementing cleaner technologies and energy efficiency
measures, but in the light of the challenges we face, these
efforts look insufficient and must be expanded,” he main-
tained.
Ocampo said many new technologies to address cli-
mate change were under investigation, including carbon
capture and sequestration.
“Energy efficiency measures and new technologies
perhaps hold the greatest potential to enable economic
growth in developing countries with far fewer environ-
mental consequences,” he affirmed.
He said investment frameworks were now under
review to ensure that funds were channelled towards
cleaner projects, but it was here that the international
community could play an even bigger role by improving
developing countries’ capacity to reach sound and capa-
ble decisions with respect to energy project planning and
implementation.
“Many oil-exporting countries have set a good exam-
ple by generously providing development aid, including
through the OPEC Fund for International Development.
“We cannot over-emphasize the importance of energy
in achieving the UN Millennium Development Goals and
the sustainable development goals of developing coun-
tries. International cooperation can play an important role
in facilitating access to clean, safe, affordable and reli-
able energy as a basis for progress in social, economic
and environmental areas for sustainable development,”
he added.
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Amidst the changes that had been sweeping the global
hydrocarbons sector, observed Deora, OPEC had remained
“rock-steady”. The Organization was expected to have an
equally challenging role in ensuring stability and sustain-
ability in the world oil market in the years ahead.
The minister maintained that prolonged market vola-
tility and high oil prices could jeopardize global initiatives
for sustainable development.
India, he stated, strongly supported the idea of greater
interdependence of cross investments in the energy mar-
kets to promote the shared interests of energy producers
and consumers.
Historically, he said, his country had a very close and
cordial relationship with OPEC Countries “and we look for-
ward to OPEC’s valuable support in strengthening India’s
oil security.”
He continued: “Over the last few decades, our relation-
ship has grown not just in terms of energy flows, but also
in terms of labour, trade, and investment. We see these
ties strengthening over the longer term,” he affirmed.
Deora said energy in general, and petroleum in par-
ticular, continued to be the prime driver behind global
progress.
“But it has its major costs — environmental pollution
and an ecological imbalance being the most noticeable.
Thus, for development to be sustainable over a longer
period, it has to meet the social and environmental needs
of human life, in addition to the economic needs.”
Energy, he stated, was key to development. “It shapes
the socio-economic quality of human life. Energy in the
form of electricity and cooking fuel contributes to the basic
human needs of lighting, warmth and nutrition. Yet world-
wide, an estimated 2.4 billion people, comprising half of
all households and 90 per cent of rural households, do not
have adequate access to commercial energy resources,”
he observed.
Deora said that by scaling up the availability of afford-
able and sustainable energy services, there was a greater
chance of achieving the UN’s Millennium Development
Goals.
“Energy services have a multiplier effect on health,
education, transport, safe water, and sanitation. Such
availability enhances the productivity of income-gener-
ating activities in agriculture, industry and tertiary sec-
tors,” he pointed out.
Deora said oil security was not just oil supply secu-
rity. Even with a secure oil supply source, a developing
country may not be in a position to procure adequate oil
unless the price was affordable.
“So, price stability has become an important constitu-
ent of oil security. Given the vital role of energy prices in
the economic and social well-being of the common man,
it is imperative that we are able to provide oil at afford-
able prices and this is becoming increasingly difficult
given the present oil price scenario,” he noted.
“We believe that the imperative of sustainable devel-
opment requires greater global energy security, in which
OPEC has a seminal role to play. Working together, con-
sumer and producer governments can meet common
challenges.
“The need of the hour is to develop a consensus-
based approach that not only optimizes the use of energy,
and looks at cleaner technology, but also ensures that
developing nations have access to it in line with the
Millennium Development Goals. The aim should be to cre-
ate a model that does not impede progress, but enhances
it, while ensuring energy security and energy efficiency,”
he added.
Shri Murli Deora, Minister of
Petroleum and Natural Gas of
India, was keynote speaker for this
session. He spoke on petroleum
and sustainable development.
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In the context of the economic development of nations,
contended Al-Herbish, sustainability had four key com-
ponents — the need and ability to economically grow and
continue to grow; environmental sustainability; social sus-
tainability; and the issue of international sustainability.
“Sustainable development is thus a very complex
challenge, but we have learned from history and from
simply observing our own world that we can ignore these
issues only at our own peril,” he said.
Concerning energy and sustainable development, Al-
Herbish noted that there was no more important issue
relating to development and sustainable development
today than energy.
“Any effort to forge an economy that is self-perpetu-
ating, if not based on sound energy planning from the
outset, is bound to fail. Growth depends on energy and
sustainable growth on sustainable energy — meaning, in
this case, affordable and reliable energy in their purest
economic sense,” he maintained.
Al-Herbish pointed out that the poorest societies
needed sufficient energy to help lift their citizens out of
the poverty they faced, while the fastest-growing econo-
mies, as well as the most developed, “would grind to a
halt” without sufficient energy.
He said the challenge of the energy producers was a
paradoxical one — to substantially increase investment
in their energy sectors, in order to meet rising global
demand for energy, and, at the same time, to build sus-
tainable economies of their own that did not depend as
much on hydrocarbons production and revenues.
The OPEC Fund’s traditional focus on poverty allevia-
tion, he said, had become a cornerstone of its mandate
and an unfailing base of the institution’s dialogue with
its partner countries.
“The Fund shares the concern for prompt access to
adequate, affordable and sustainable energy services,”
he asserted.
Al-Herbish stated that the OPEC Fund’s energy sector
financing of $946 million had contributed to implement-
ing 120 projects. This had helped in bridging the gap to
successfully implement cofinanced investment projects
worth $14.5 billion over the last 30 years.
He said the Fund stood ready to share its experience
with its partner countries and the development aid com-
munity to accelerate the development of energy services
in the poor countries in which it operated.
In recognition of the variety of situations and differ-
ent economic capacities, the institution had developed
a series of new products and financing windows which,
when combined, allowed an adequate response to the
pressing need for energy development, particularly in
favour of the poor, he added.
The next address was given by
Suleiman Jasir Al-Herbish, Director
General of the OPEC Fund for
International Development, who
spoke on the role of the institution
in supporting sustainable
development.
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In a world that was becoming more connected and inter-
dependent than ever before, said O’Reilly, sustainable
development was not an option — it was an imperative.
“The contribution of petroleum to sustainable devel-
opment would be a compelling topic at any point in time.
But it’s particularly relevant in this time of dramatic change
in the world’s energy industry,” he said.
O’Reilly stated that growing demand and an increas-
ingly complex operating environment were making the
delivery of reliable, affordable energy one of the biggest
challenges of today.
“Our industry has a responsibility to foster sustained
development — and to do so in ways that provide energy
efficiently, as well as contributing to economic and human
progress.
“This is a steep challenge in a world where the popu-
lation is growing and the gap between the rich and poor
is wide,” he affirmed
O’Reilly said the world’s growing population would
expect a range of energy-related products. People would
also expect something more intangible, but critically
important — opportunity for education, for employment,
“for a better life”.
He stated: “Our industry can and does play a role in
providing this kind of opportunity by building economic
and social value in the communities where we operate.”
O’Reilly went on to discuss five model elements he
considered were required for sustainable development
— business investment, building a local workforce, ena-
bling local supply chains, investing in the community, and
supporting policies that promoted economic growth and
a stable investment environment.
He said that as an industry, “we are uniquely and
powerfully positioned” to deliver what millions of peo-
ple worldwide longed for — investment, jobs, a sta-
ble environment, healthy communities, and a vibrant
economy.
“I am an optimist. I believe that the petroleum indus-
try can help millions of people realize a more healthy,
environmentally sound and prosperous life.
“But that cannot happen unless there is responsible
and accountable leadership from everyone in the energy
value chain — producing countries, consuming countries,
national and international companies, policy-makers and
communities.
“This leadership must be rooted in action, not words.
It is only through accountable, responsible leadership that
the economic benefits of the energy we discover and pro-
duce will flow to all stakeholders. Working together, we
can all help build a sustainable future for many millions
of people — a future in which all of us can be proud,” he
added.
David J O’Reilly, Chairman
of the Board and Chief
Executive Officer of
Chevron, was the next to
take the podium. He spoke
on the contribution of
petroleum to sustainable
development from the
point of view of an
international oil company.
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All the initiatives carried out by the Malaysian govern-
ment in connection with the energy industry had made a
positive impact on the country’s economy, Idris pointed
out.
The use of gas had lessened dependence on oil and
the development of a petrochemical industry had sup-
ported the local manufacturing industry, besides earning
revenues from exports.
“But perhaps a more positive impact is the diversi-
fication of the Malaysian economy itself from what was
largely agrarian in the early 1970s to more manufactur-
ing-based, as it is today,” he noted.
However, Idris said the cornerstone of the success
seen in Malaysia had been the country’s ability to develop
its human resource talents and capabilities.
“With a pool of talented human resources, we were
able to develop our own institutional capabilities and
track record. This is certainly an investment that has paid
off many times over,” he professed.
Looking at the country’s oil history, he said that in
most places where oil was discovered, there was eupho-
ria amongst the people of the land.
“Oil is seen as an answer for a nation to emerge from
the shackles of poverty. However, the irony is that some
countries remain poor despite the presence of oil and it
does not contribute to the well-being of the people.
“Often, we hear of the term ‘the oil curse’ and many
parties are blamed for such a situation — foreign oil com-
panies, national oil companies, government leaders, other
sectors of the economy, and others,” he stated.
Idris maintained that oil need not be a curse. On the
contrary, it promised sustainability for all, “but only if
each and every one of us looks deeper into our roles.”
He said that in order for oil to feed into a virtuous
cycle of national development it required strong politi-
cal will and a responsible government.
“But yet, this is not enough. More attention should
also be given to fostering greater cooperation amongst
governments, the NOCs, the IOCs, contractors, service
providers and institutions of higher learning to create
a vibrant oil industry that continues to contribute to the
national development agenda.
“Oil is a finite resource. We cannot change that fact.
It is a gift from God for us to exploit and benefit from.
How we benefit from it, is our choice. Perhaps, we need
to look beyond oil,” he added.
The final speaker in this session was
Nasarudin Md Idris, Vice President of the
Corporate Planning and Development
Division of Petronas, Malaysia, who
talked on oil for development, and the
experience of Malaysia.
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The role of OPEC in a new energy era
The Chairman of the final panel
discussion was Dr Purnomo
Yusgiantoro, Minister of Energy and
Mineral Resources of Indonesia.
Before introducing the nine panelists, Yusgiantoro said
the seminar’s final round of presentations had the pur-
pose of looking at how OPEC should adapt its role to the
changing landscape of the international oil industry.
He posed the questions — “Is OPEC doing enough? Is
there more that OPEC should be doing to meet the future
challenges?
These, said the Minister, were the answers “we are
looking for in this panel discussion.”
Speaking on energy security, Hamaneh said it was an issue
that could be looked at from different angles.
He pointed out that security of supply was secure
because of the main role played by OPEC, whereas secu-
rity of demand was insecure because of the energy poli-
cies of the consumer countries, which threatened capac-
ity-building investments.
Security of demand also required access to markets,
a factor that was hindered by fundamental problems in
the policies of some consumers, who had erected many
barriers.
The Minister noted that other elements that figured
prominently in the issue of energy security were security
of investment and security of technology.
“The removal of barriers to accessibility of markets
and technology will certainly lead to supply and demand
security in desirable forms,” he maintained.
The outlook for the world economy indicated that glo-
bal demand for energy was still rising, with oil and gas
expected to play the dominant role in the world’s energy
consumption mix, said Hamaneh.
Sayed Kazem Vaziri Hamaneh,
Minister of Petroleum of the
Islamic Republic of Iran.
Members of the final panel comprised: Sayed Kazem Vaziri Hamaneh, Minister of Petroleum, Iran; Hussain Al-Shahristani, Minister of Oil, Iraq;
Mohamed Bin Dhaen Al Hamli, Minister of Energy, UAE; Dr Ali Rodriguez Araque, Minister of Foreign Affairs, Venezuela; Sadek Boussena, former
Algerian Minister of Energy and Mines; Martin Marmy, Secretary General, IRU; Paolo Scaroni, CEO, Eni; Ian Taylor, President, Vitol Group; Peter
Odell, 2006 OPEC Award winner. (Álvaro Silva Calderón of Venezuela, former OPEC Secretary General, made a presentation from the floor.)
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He noted that there were sufficient oil and gas
resources in the world, but a considerable part of the
growing demand for oil would have to be met by OPEC
Member States, especially the Gulf countries.
“Therefore, investments are to be concentrated in the
high-reserve, low-production-cost regions,” he pointed out.
The Minister said that in adopting approaches to
energy security challenges, due attention had to be paid
to the impact of governments’ foreign policies on energy
and market developments.
Since there was accessibility to the producers’ oil and
gas resources, sources of technology were also expected
to provide access to technologies for the production of
all kinds of energy.
“Governments of producing and consuming countries
should do their utmost to enable market forces to play
their part in an atmosphere void of political interference,
where all acceptable international norms, regulations,
and controls can be applied,” he said.
In summing up, the Minister made several observa-
tions which, he said, had received widespread recognition.
He maintained that there were sufficient oil and gas
resources in the world to guarantee security of supply,
while a reasonable level of oil and gas prices, their stabil-
ity and sustainability, were factors influencing the trend
of investments. Efficiency and return on investment in
the energy industry was greater than investment in other
industries.
The Minister also stated that peace and political sta-
bility were essential pre-conditions for ensuring continuity
of investment flows, while the elimination of downstream
bottlenecks in the consuming countries was essential to
ensure that sufficient and timely refining capacity was
available to supply the required petroleum product speci-
fications of environmentally-friendly standards.
“Cooperation of technology sources in energy con-
servation and efficiency of producing countries, together
with a gradual elimination of energy subsidies, will fur-
ther bolster energy supply security.
“Producers and consumers should apply supportive
policies and facilities to further their cooperation in this
field,” he maintained.
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Discussing the role of Iraq in the new energy era,
Al-Shahristani noted that the world economy would
continue to expand at a moderate to strong pace in the
future, which would translate into considerable growth
in demand for energy.
Iraq, he said, with its vast oil potential, would be a key
player in the years ahead. The country’s output potential
needed to be utilized to enhance stability in the world oil
market and to help preserve sustainable global economic
growth.
The Minister noted that, due to the problems his coun-
try had faced over the past three decades, Iraq’s great oil
potential remained underdeveloped. Crude production
capacity was at a great disparity to the nation’s “excep-
tionally rich resources.”
Said Al-Shahristani: “Neither the people of Iraq, nor
the world community, have been able to enjoy the ben-
efits of Iraq’s vast oil potential.”
He noted that now that a permanent constitution had
been approved by the people of Iraq, the elected govern-
ment was taking serious steps towards rapidly develop-
ing the nation’s oil potential.
The key step in this direction, he stated, was the Oil
and Gas Law, which was designed to provide maximum
encouragement for the development of Iraq’s large oil
and gas resources, as well as modernizing the domestic
oil industry in general.
“The draft law is being discussed by the Ministerial
Committee for Energy — it will be presented to parliament
before the end of the year,” he said.
“Of course, partnership and other forms of coopera-
tion with international investors of recognized technical,
managerial and operational skills, as well as possess-
ing robust capital resources, will be encouraged to help
upgrade and develop national expertise, for, on the one
hand, efficiency, and, on the other, development of the
oil and gas resources,” he explained.
Al-Shahristani pointed out that the introduction of
a variety of national and international players in the
development of the domestic petroleum sector called
for clear legislative, institutional and operational frame-
works to ensure cooperation and efficiency between the
Iraqi authorities and the commercial players, as well as
among the players themselves.
“We recognize the need for clear, fair, transparent and
efficient systems and legislative measures that inspire
confidence, cooperation and efficiency among all par-
ticipants in the petroleum sector,” he affirmed.
“We are aiming, with this new conducive environment,
to modernize Iraq’s upstream activities and to expand
our crude oil production gradually to over 6 million b/d
in the next ten years,” stated the Minister.
He said that to achieve this goal, Iraq was looking
forward to further cooperation with all OPEC Member
Countries — through their national oil companies — and
all international oil firms, especially the majors.
“The present democratically-elected government of
Iraq is determined to use the vast oil wealth for the benefit
of its people and to help preserve stability in the world oil
market at a sustainable oil price level,” he concluded.
Dr Hussain Al-Shahristani, Minister of
Oil of Iraq.
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In giving an overview of some of the challenges ahead,
Al Hamli stressed that the world’s need for energy would
continue rising, due to growth in the global population,
economic activity and a continuing improvement in liv-
ing standards.
The extra supply of oil and gas to meet future world
energy needs was expected to come mainly from OPEC
Member Countries, since they possessed the largest
hydrocarbon reserves in the world, he observed.
Also, in most OPEC Member Countries, the cost of
oil production was far lower than in other oil-producing
regions, he said.
Looking more closely at some of the challenges fac-
ing OPEC in the new energy era, Al Hamli said the first
challenge was increasing the Organization’s share in the
world oil market to reflect available hydrocarbon resources
and their low cost of production.
He said it was a well-known fact that substantial quan-
tities of crude oil remained in the ground, deposits that
could not be recovered by standard oil industry recovery
techniques. In many oil fields, the oil recovery ratio did
not exceed 35 per cent of the total reserves in place.
“To recover more oil, sophisticated enhanced recov-
ery techniques are needed. Appropriate development
and investment are needed to make these techniques
available,” he stated.
These new techniques, said the Minister, would usher
in a revolution in the petroleum industry, comparable in
impact to that of the introduction of 3-D seismic to explo-
ration technology many years ago.
However, enhanced oil recovery techniques were
costly and resources should be put together to achieve
the objective of their future development at a minimum
cost to individual parties.
“It befalls OPEC to attempt to change the attitude
in the petroleum community — in both the private and
public sectors — to take a long-term view and strive to
extend the petroleum age as much as humanly possible,”
he stressed.
Regarding high oil prices, which, Al Hamli said were
being caused by geopolitical developments, refining bot-
tlenecks and speculative activity in the oil futures mar-
kets, there was no doubting that they were detrimental
to the oil producers.
This was because they had the potential to dampen
world economic growth,
which in turn would
impact on demand for
oil.
“Higher oil prices also
provide an impetus for the
development of less effi-
cient alternative energy
sources. It is therefore
in the interest of all to
contribute to efforts to
moderate prices to the
level supported by mar-
ket fundamentals,” he
asserted.
Al Hamli pointed out
that OPEC had always
been committed to pro-
viding market stability,
not only through ensuring
sufficient oil supplies for
consumers when needed,
but also in the form of
adequate spare capacity
that acted as a cushion
during unexpected sup-
ply disruptions, or when market conditions called for it.
He pointed out that it was difficult for OPEC Members
to commit the financial resources necessary for addi-
tional capacity schemes without assurances that the
extra capacity would not fall idle and the demand would
be forthcoming.
“To do so would jeopardize health services, educa-
tion, infrastructure, and the social and developmental
requirements of the populations of the oil-producing
countries,” contended Al Hamli.
“Energy security is a shared responsibility between
the producing and the consuming countries and must be
approached from that perspective. We need to strike a
balance between what is needed to stabilize the market
and reasonable expenditure that does not threaten devel-
opment in the producing countries. This is the dilemma
we face and one that eludes a solution without the coop-
eration of both parties,” he said.
“In the new energy era, OPEC must face the challenges
on all fronts if it is to avoid excessive and harmful volatil-
ity in the oil market. Our collective efforts and resources
must be put together to seek solutions to these thorny
issues, wherever possible,” he added.
Mohamed Bin Dhaen Al Hamli, Minister
of Energy of the United Arab Emirates.
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Speaking on the challenges and opportunities OPEC would
likely face in the new energy era, Rodríguez Araque said
the key question that came to mind was — “Is it really a
new era, or are we merely in the upswing of a very long
cycle? I think the answer is the latter.”
In his opinion, the greatest problem in the so-called
new energy era lay in recognizing the fundamental prob-
lem of realizing a fair and stable division of petroleum rent
between investors and the natural resource owners.
“This issue is still not being addressed,” he main-
tained.
The Minister said the big question, not only for OPEC
but for all participants in the energy sector, was still — are
consuming countries and the international oil companies
ready to accept the sovereign management of the natural
resources of the exporting countries?
“Such an acceptance is a requisite for a stable insti-
tutional framework. After all, such an agreement is viable
only when all parties recognize each other’s essential
rights,” he maintained.
Rodríguez Araque said this understanding was essen-
tial for those nations that owned oil, not only for the intrin-
sic value of their natural resources to be recognized, but
also the legitimacy and right of their national oil compa-
nies to exist.
Last, but not least, there should be in existence a
quota system relating to the export and conservation of
the resources in question.
“Without these basic conditions, it is impossible for a
producing country to pursue a viable development strat-
egy,” he professed.
The Minister said the acceptance of the consuming
countries of these matters was unfortunately far from
assured.
“Fortunately, the recent example of Venezuela shows
that it is perfectly possible for companies and the gov-
ernments to reach an understanding based on mutual
respect … for each other,” he said.
Such a global understanding, which involved not only
OPEC Countries, but also other key players, was possible
only with the backing and the participation of consuming
nations.
“As long as the consuming countries ignore this,
the oil market will continue with cyclical periods of ups
and downs where the only constant is instability,” said
Rodríguez Araque.
He said OPEC now had a great opportunity in the
midst of the latest sellers’ market to define the path to
this new relationship and a new role for the national oil
companies.
“However, we must not forget that what goes up will
eventually go down — and this is the reality of petroleum
cycles,” said the Minister, in reference to the higher prices
seen over the last few years.
“To pin our hopes on projections of sustained high
prices continuing in the foreseeable future would be non-
sensical because, as the saying goes, ‘he who does not
learn from the lessons of the past is bound to commit the
same mistakes again.’ ”
Dr Alí Rodríguez Araque,
Minister of Foreign Affairs of Venezuela.
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In an address on the new trends OPEC was having to con-
tend with, Boussena said the Organization, once again,
seemed to be at the crossroads.
With the much talked about new energy era, OPEC
had, he maintained, definitely the obligation to adapt
its strategy to the new conditions, the new opportuni-
ties, and the new constraints.
Boussena said that if he had to single out two main
trends of the new era, first there was a high probability
that the future would be better for all sellers than the
past.
“Demand is going to grow and prices should be higher
than in the past. Access to oil reserves is strongly inter-
esting the international oil companies and there are real
opportunities for OPEC Member Countries to capture a
higher value of the barrel, in particular through a better
use of their national oil companies,” he said.
Boussena said the second trend, which was not
particular to the oil industry, was that there would be
larger uncertainties in the years ahead — over supply
and demand levels, the development of energy alterna-
tives, geopolitical developments, and uncertainty over
the future direction of oil prices, which were a determi-
nant of the future of the industry.
He pointed out that one of the main contributions of
OPEC in its future strategy was to try and help reduce the
consequences of such uncertainties.
The Organization was in a better position when the
oil market was relatively tight, rather than when there
was too big a surplus in supply capability.
“Too much spare capacity leads automatically to
destructive competition among OPEC Member Countries,”
contended Boussena.
He said that barring any major surprises on the
demand side, he did not expect that the world oil mar-
ket would benefit again from huge spare capacity, as it
did in the 1980s and 1990s.
“Looking at the situation optimistically, one could
expect to have a three to five per cent cushion in spare
capacity in the future. The world should learn to live with
a lower spare capacity,” he maintained.
Boussena said OPEC had to be able to monitor more
closely the oil market and market trends and to strengthen
its capacity for studies and statistics.
In this way, the Organization could follow up data on
the volumes required and the timing of projected future
production capacity expansion for OPEC, non-OPEC, and
credible alternatives.
“If OPEC accepts to take the risks of maintaining spare
capacity, even a limited amount, to again play the role of
swing producer, it will be in a good position to ask oth-
ers to share the responsibility of having to stabilize the
market. This could hopefully lead to a more concrete dia-
logue for the future,” he added.
Sadek Boussena, Former Algerian
Minister of Energy and Mines, and
now Professor of Economics at the
University of Grenoble.
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In looking at the future of transportation in the energy
demand mix, Marmy said the role of OPEC in the new
energy era would remain very important, due to the large
proven oil reserves located in the Organization’s Member
Countries and the fact that oil was not a regular, but a pre-
mium strategic energy resource seen everywhere.
However, he pointed out that the new era incorpo-
rated numerous challenges.
Marmy said that, looking to the future, he was a firm
believer that “our children’s children” should also have
the right to benefit from “black gold”, in particular in road
transport, where no viable alternative existed.
Secondly, he maintained that the rapid and huge
increase of diesel and gasoline prices at the pump should
be stabilized by appropriate energy policies.
“An appropriate energy policy in the oil-consuming
countries requires at least improved energy and oil effi-
ciency, based on the diversification of the energy used
in fixed installations, including through efficient taxation
and incentives, where viable alternatives to oil exist,” he
noted.
“This should be coupled with a moderate and bal-
anced fiscal policy where no viable alternative to oil exists,
such as in road transport,” he affirmed.
Marmy said that, thirdly, the reinforcement of envi-
ronmental regulations represented another global chal-
lenge for the petroleum industry.
He maintained that for the road transport industry,
the right to emit carbon gases, as foreseen by the Kyoto
Protocol, was now more a profitable business than an
effective measure to reduce pollution.
“This is why, if carbon taxes are really an effective tool
to reduce emissions — taking into account that the oil mar-
ket is global and that the emissions are a global challenge
— the carbon tax should not be collected locally, by gov-
ernments of the consuming countries, but at the source
of the global oil market, where each barrel of oil is pro-
duced, meaning in the oil-producing countries,” he added.
Martin Marmy,
Secretary General of the
International Road Transport Union.
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Speaking on security of supply and market stability,
Scaroni said there was a pressing need for huge invest-
ments along the whole oil value chain, as well as for build-
ing a platform of cooperation to face the challenges.
Security of supply was not being threatened by a
scarcity of hydrocarbons, he asserted.
Thanks to modern technology, recovery enhancement
and successful exploration techniques, the estimate of
world recoverable oil resources had actually increased
over time — from 2 trillion barrels in the 1970s to the
most recent estimates of 3.3–3.9tr b.
Moreover, the US Geological Survey had estimated
that technically recoverable reserves of non-conventional
oil — located mainly in Canada, Venezuela, and Russia
— were about 1tr b.
“Therefore, total recoverable reserves amount to
nearly 5tr b, with a life-span of more than 100 years,”
he noted.
Scaroni said there were several reasons to believe
that global oil supply pressures may be overcome over
the next few years.
Global oil demand was projected to grow by two per
cent, spare capacity should dramatically recover at the
end of the decade, with overall supply capacity expected
to be sufficient to meet demand growth, a development
that would push prices lower.
In addition, investments in oil exploration and devel-
opment were booming and there was still a lot of produc-
tion potential worldwide.
Scaroni said many speakers at the seminar had
pointed to the huge investments required for the increase
in production, transportation, and refining capacity.
“But I don’t think money is an issue. Rather, I think
that one skill will be key — the ability to manage huge
investment projects which are price-sensitive and where
it takes several years to recover the capital invested.
Technology and adequate management skills will be cen-
tral to both upstream and downstream in the future,” he
maintained.
Scaroni said that against this background, OPEC pro-
ducers had the opportunity to become exporters of energy
and products, not solely of one raw material — crude oil.
“This is the perfect time to make such a transition.
The high oil price gives us all the opportunity to invest in
the future. But we should move fast. History teaches us
that sooner or later oil markets will react,” he added.
Paolo Scaroni,
Chief Executive Officer,
of Eni SpA.
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In taking a look at the way oil is priced, Taylor said he
shared the views of many that volatility was a very bad
thing for the oil market.
“As a physical trader, we in Vitol hate volatility. It
means that we can’t do our job as well as we would like
to do in making sure that the producers get the best
prices for their products. We are always happy to look
at ways where we can make the market smoother, more
efficient and probably less volatile in price terms,” he
said.
Taylor said he thought OPEC should be congratulated
for the many, many years it had been diligent and respon-
sible in supplying crude to the market — when the mar-
ket needed it — yet also taking the crude away when the
market did not require it.
“I am sure it will continue to do that in the years to
come,” he affirmed.
However, Taylor said it was fair to say that the oil
industry in general had not been perhaps quite as suc-
cessful, especially in the way prices were being set.
“Prices tend to be set on a daily basis by the various
futures exchanges. There is actually a very small partici-
pation from the industry itself and by OPEC.”
Taylor said that in line with the fact that OPEC Member
Countries were an important part of the industry’s produc-
tion today, and would be even more so in the future, “we
should be looking at a new future for setting the prices
of oil.”
In urging OPEC producers to become more involved
in the price side of the equation, he stated: “We have the
situation today where very large volumes of oil futures are
traded and the prices set reflect supply and demand for
futures, not necessarily the fundamentals of supply and
demand for oil.
“If one looks at the crudes that back-up the futures
exchanges — WTI, Brent and Dubai — they account for
production of a lot less than 1 million b/d, compared
with the world’s total production and consumption of
85m b/d,” he said.
Taylor pointed out that he had always felt that the
correct oil future was not WTI, Brent, or Dubai — but the
OPEC Basket.
“I feel that a market that traded OPEC Basket futures
would actually be the right way to price oil in the future.
This would have great benefits because it would involve
the people who are very much part of the industry — the
producers of the oil. It would ultimately lead to greater
security of supply and demand,” he affirmed.
Taylor said Vitol and other market participants would
welcome “very much” OPEC’s participation in the futures
market. An OPEC futures basket would be an ideal move
and would be very well supported.
Ian Taylor, President of the Vitol
Group of Companies, United
Kingdom.
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The final address was made by
Álvaro Silva Calderón, Former
OPEC Secretary General of
Venezuela, who was a special
guest at the seminar. His
speech, in its entirety, can be
seen on page 74.
The next panel speaker was
economist Professor Peter Odell, the
2006 OPEC Award winner.
His insight into the future direction of the global energy
industry can be seen on page 78.
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Over two days of intense discussion, many mes-
sages came through as to oil’s future direction
and the challenges facing the industry in the
years ahead.
Speakers expressed views on a variety of topi-
cal issues, but throughout all the deliberations,
a general convergence of opinion emerged on
several topics.
Chief amongst these was the recognition that
the world still has plenty of oil with which to sat-
isfy global needs for generations to come.
There was also broad agreement that the pro-
ducers must strive to ensure that these abun-
dant hydrocarbon reserves are accessed, proc-
essed and distributed to consumers in a timely
and orderly manner, with stable and reasonable
prices.
In addition, it was also felt that consum-
ers must focus on enabling steady, predictable
demand, so as to provide fertile ground for sound
investment strategies in future production capac-
ity, from which the world at large can benefit —
rich and poor alike.
As OPEC Conference President, Dr Edmund
Maduabebe Daukoru, aptly put it during his
closing remarks: “The challenge remains that of
deliverability … not availability.”
The following points cover other important
messages that came through strongly as a result
of the various presentations made:
Fossil fuels during the new energy era will
continue to dominate the global energy mix
and will continue to be vital for supporting
the forecast expansion in global economic
growth, which, under normal conditions
should stay robust.
A changing pattern in the dynamics of oil
demand is being witnessed today, with a
geographic shift in growth patterns from the
OECD countries to emerging Asia, China in
particular. This growth will be primarily driven
by the transportation sector.
Energy security, both for producers and con-
sumers, should continue to grow as both
sides work for greater predictability of sup-
ply and demand as a guarantee for a stable
oil market in the future.
The conventional resource base is sufficient
to meet the growth in global demand pro-
jected, with technological advances and
breakthroughs being critical for supporting
this process.
Seminar delivers important messages
on oil’s future direction
“Deliverability … not availability”
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Capacity expansion programmes are less-
ening fears over shortage of supply, a devel-
opment that should reduce the speculative
element reflected in high oil prices for quite
some time.
The Middle East will remain central to glo-
bal supply growth in the foreseeable future,
although non-OPEC producers will continue to
account for the bulk of world oil up to 2025.
The role of national oil companies in world
markets is expected to grow in collaboration
with the international oil firms.
Environmental concerns will continue to have
a huge bearing on oil’s future direction with
pressure mounting on the industry to pro-
duce ever-cleaner fuels. This will require a
timely and broad-based global response,
but one that goes beyond the Kyoto Protocol.
Substantial new investment will be needed
to provide the technology and innovation
required to address this challenge, as well
as for developing such worthy processes as
enhanced oil recovery techniques and carbon
capture and storage.
Potential fiscal imbalances and rising inflation
could lead to a further rise in interest rates
in the OECD region, especially in the United
States.
With global energy demand set to rise sig-
nificantly over the next 15 years, there will
be a pressing need for fresh investment in
new output capacity across the entire sup-
ply chain, both upstream and downstream.
Against a background of higher energy
demand and prices, an increasing number
of governments are expected to implement
energy conservation programmes, resulting
in greater efficiency, reduced consumption
and increased cost competition.
Overcoming downstream challenges is
equally as important as satisfying upstream
demands, an issue that requires a concerted
effort from those players responsible in the
downstream, especially the international oil
companies. There is a strong need for further
investment in additional refining capacity,
particularly for conversion and desulphuri-
zation units.
Uncertainty over oil’s future direction could
see price volatility continue, such is the com-
plex nature and sensitivity of today’s interna-
tional oil market.
Considerable progress has been made in the
promotion of energy dialogue, especially over
the past year or so, yet much still needs to
be done. A general awareness has emerged
that only through concerted cooperation and
regular interaction among the main players
— producers, consumers and investors alike
— can a better understanding be obtained of
the most important issues involved.
OPEC will continue to pursue the road of dia-
logue and cooperation and will strive to bring
as many players under this umbrella as pos-
sible.
Renewables are beginning to receive more
attention with strong government support
and will remain a focal point of interest in the
energy mix for the foreseeable future.
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How badly did the sanctions affect the oil industry
in Libya?
They affected us badly because we were deprived of a
lot of spare parts and were not allowed to get the technol-
ogy (particularly computers) we needed. We were not able
to revamp our refineries, our petrochemical complexes, as
well as other facilities. The sanctions also affected other
sectors, such as aviation.
You have already said Libya is planning to expand
its oil production capacity. Are you also planning to
boost gas output?
Yes certainly. The gas sector has been expanded
already and we are going to put more emphasis on the
gas industry in the future. Only last year we opened a sub-
sea pipeline that can carry 10 billion cubic metres a year
of gas to Italy. Also, we are completing our domestic gas
pipeline grid so that we can bring supplies to our steel
mills, power plants and some factories so that they can
benefit from being gas-fuelled, rather than oil. Companies
are coming to Libya to look specifically for gas and we are
What are your plans for the Libyan oil industry over
the next few years?
Libya in the 1970s produced more than 3.5 mil-
lion barrels of oil per day, but because of political pres-
sures, the embargo and boycotts our forecasts dropped
to less than half of this — to about 1.5m b/d. Now that
the embargoes have been lifted, and the other problems
sorted, we are planning to go back and assume our (right-
ful) place in the industry. Therefore, we are embarking on
a plan to open our doors to top foreign companies and
more investment in a very competitive and transparent
way. In pursuit of this goal, we have resorted to several
bidding rounds. So far, we have had two rounds, which
have seen more than 30 companies come and work in
Libya. Now we are offering a third bidding round, and
more than 150 companies have already shown an inter-
est. This is all setting the stage for us to increase our pro-
duction capacity and realize our full potential. The plan
is that by mid-2007, we will be able to produce 2m b/d
of crude oil. Then, between 2010 and 2012, our plan is
to increase our capacity further — to 3m b/d.
With sanctions now a thing of the past, it is without doubt an exciting time for Libya. Aided by higher oil
revenues, the government is implementing various socio-economic programmes and, most importantly,
breathing new life into the country’s petroleum sector. Dr Shokri Ghanem, who for three years was Secretary
of the People’s Committee (Prime Minister), before taking over the oil portfolio as Chairman of the People’s
Committee, the National Oil Corporation (NOC) of Libya, has the responsibility for moving the country’s oil
sector forward after years of enforced stagnation. The Bulletin’s Edward Pearcey caught up with the Minister,
at the OPEC International Seminar and asked him about life after the economic embargoes.
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“Let the best man win!”
Libya has a new motto as its petroleum industry opens up
to foreign investment after years of crippling sanctions
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expecting to be one of the biggest gas-producing coun-
tries in the next five to ten years.
What social projects are being financed by the extra oil
money Libya is receiving as a result of higher prices?
We have a number of big projects, but they are all
being carried out within an economic development plan.
We have a big housing project going on and, of course, the
man-made river scheme, which is bringing purified water
from the south of the country into the cities. We also have
a lot of things going on with roads, airports and ports, so
there is a lot of infrastructure being developed. However,
we prefer to open our doors to foreign investment, rather
than fund these projects solely through the government.
We are thus encouraging the private sector to work and
participate in the economic development of Libya.
What companies are being encouraged to come to
Libya?
We are encouraging all the companies we can to come
to the country. We are also pre-qualifying some firms to
encourage smaller companies that may not be able to
match the larger organizations. We are opening the way
for every company that has certain qualities and quali-
fications, whether they are financial, or technical. After
pre-qualifying, they can then participate in the bidding
rounds. Of course, all the big companies are naturally
qualified, and you will see international firms such as
Shell, Exxon, Chevron and British Petroleum in Libya.
Are you actively encouraging smaller oil companies
to come to Libya?
People have been debating whether or not one should
encourage smaller or bigger companies to come to one’s
country since the 1950s. In my opinion, we have to strike
a balance as both big and small companies have their
advantages and disadvantages. So, we are putting in a
minimum requirement for a company to qualify to come
to Libya and this allows for small companies (such as
those that can produce just over 30,000 b/d of oil with
reserves of maybe 300 million barrels) to participate. Big,
medium, and small companies are welcome.
Tell me about the award you are in line for this year?
It is to be given at this year’s Oil and Money Conference
in London. This award is given to people who, it is said,
have made some difference in the oil industry. In my case,
I played a significant part in opening Libya up to invest-
ment. During this process, I also insisted on transpar-
ency and fair competition. We moved away form straight
negotiations between companies and the government
and opened up a bidding round. Decisions are taken in
the open, on a certain day. Our new motto now is: “Let
the best man win!”
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T
Market stability and energy
integration – the way forward
hose of us who had the opportunity of witnessing the birth of OPEC can
attest to the difficulties of that birth and to the climate of uncertainty
surrounding the viability of the Organization. At that time, the world of
oil was dominated by the large cartelized enterprises, supported by the
governments of their countries of origin. It operated in a colonial way which viewed
the hydrocarbon reserves of undeveloped or backward countries as ‘wild’ and, con-
sequently, vulnerable to seizure and appropriation. Once these reserves were proven,
the companies sought to take possession of them. They did so, by including them in
their asset inventories and by exploiting them as if they were the rightful owners and
with the hope of tapping these resources on an indefinite or ongoing basis.
All this was possible because, in addition to the extended periods they were
granted through concessions or contracts, these enterprises consistently sought to
extend the benefits they enjoyed by using all the mechanisms and resources at their
disposal. These included maintaining absolute confidentiality — often bordering on
secrecy — with respect to technology and the ways in which hydrocarbon resources
were being exploited, thus depriving the nations and governments - who were the
actual owners - access to these natural resources, and preventing the formation of
national capital through the purchase of goods and services abroad. This strategy,
in turn, deprived local enterprises of opportunities and, incidentally, proved to be
yet another way of extracting earnings from the countries where the petroleum was
being produced.
Álvaro Silva Calderón, who was Secretary General of OPEC in
2002, made a welcome return to Vienna to attend the Third
OPEC International Seminar. Now a Consultant to the Venezuelan
Energy and Petroleum Ministry, his address to the distinguished
gathering looked at OPEC’s position within a new energy era.
OPEC’s evolving role in new energy eraSp
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The monopoly over technology, the lack of oppor-
tunities for local talent and the export of capital even-
tually crippled the nations in which the hydrocarbon
resources were found, forcing these nations to seek —
or to submit to — the apparent protection of the large
corporations and their governments, in order to have
their fossil fuel resources exploited. This was the objec-
tive of the big enterprises and their countries of origin.
This mechanism was pursued and used permanently.
At times, it was used shamelessly and threateningly.
Governments were influenced and pressured in several
ways, some of which may be described as brutal.
Colonialist approach
These included such strategies as coups d’etat, terri-
torial distribution, or, with regard to the fields of pri-
vate owners, indirect expropriation by means of the
low-cost purchase of land, property rights and even by
exercising the legal authority to expropriate, which was
granted to them by the governments of the countries in
which they operated.
For their part, the petroleum companies hoped
that special regulations would be implemented to their
advantage, as in the case of contractual arrangements
that could not be amended by the national states and
that provided them with some degree of immunity vis-à-
vis the general legislation of the countries themselves.
Furthermore, they sought to be treated in the same way
as individuals governed by international law and thereby
exempted from national jurisdiction. This colonialist
approach was present and active in — and threatening
to — the countries that had recently been liberated from
political colonialism or were in the process of struggling
free from it. The governments had to struggle against
these aspirations being pursued by the petroleum com-
panies, but they often failed in their efforts because of a
lack of international solidarity. Yet, their struggles have
remained as examples to be followed.
It was in this environment that the idea of coordinat-
ing the policies of the major oil-producing and export-
ing countries arose, as a way of redressing some of the
effects mentioned above. The overwhelming power of the
oil consortiums, and of the countries protecting them,
was well known by those promoting this idea. This was
why they had to act cautiously and intelligently to reach
the objective set, which they actually did for some time,
until they had their first breakthrough — at the time of the
First Arab Petroleum Congress. This was convened on a
small, little-known island on the Nile, where the so-called
“gentlemen’s agreement,” or Maady pact, was achieved.
Yet this was merely the initial success of a strategy that
would later lead to the creation of OPEC. The real strug-
gle came afterwards; namely keeping the Organization
alive and ensuring that it achieved its goals. The strug-
gle was two-fold. On the one hand, OPEC had to fight
against those who sought to undermine its prestige by
likening it to a cartel, or by claiming it possessed other
assumed weaknesses, in an effort to “put it on its knees”
before those who dominated the petroleum world at the
time. On the other hand, it had to strive to strengthen
itself and to chart clearly defined paths, in order to attain
its objectives.
The environment described above has since changed,
thanks to the presence and efforts of OPEC - yet new chal-
lenges and opportunities have arisen. OPEC was created
with the fundamental purpose of protecting petroleum
prices, which were being manipulated by the big trans-
national enterprises. Instead of using oil prices as a true
market tool, these enterprises applied them as a mecha-
nism to allow benefits to be transferred from the produc-
ing countries to the economies of the large developed
centres, given that they were the ones influencing and
controlling prices. OPEC has been engaged in the search
for a fair oil price through its efforts to stabilize the oil
market. Today, the Organization is viewed as a positive
body by non-associated producing countries and by con-
sumers alike, who are now asking it to continue fulfilling
this function, particularly in difficult circumstances - even
through organizations they themselves created to oppose
or neutralize OPEC.
Aggressive attacks
After having trodden this difficult path, on which it had to
cope not only with obstacles to its own work, but also with
intentional aggressive attacks by the traditional global oil
consumers, OPEC is today an institutionalized organiza-
tion. It enjoys juridical status under international law; it
is formally recognized by the world community; it has
attained widespread acceptance on the basis of its use-
fulness to its Member States, to the other oil-producing
countries and to consumers; and it has been lauded for
its capacity to foster cooperation, which it implements in
other areas of interest in the world at large.
Out of ignorance, rather from any initial attempt to
damage the image of the Organization, some continue to
call OPEC a cartel. This is a poor definition which in no way
“OPEC had to fight those that sought to undermine its prestige.”
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ar reflects the true nature or approach used by OPEC. The Organization
in itself does not reflect the technical and juridical concept of a car-
tel, which is a malicious structure condemned by all the world’s legal
systems and designed to distort the market through the creation
of such mechanisms as scarcity, the distribution of areas, or other
mechanisms aimed at generating undue earnings. In addition, a car-
tel is generally founded on secret agreements outside the scope of
the law.
The efforts made by some sectors to define OPEC within the limits
of a cartel may be described as rash in the face of the Organization’s
status as an institution existing under international public law, cou-
pled with its actions to coordinate the policies of sovereign countries
and its quest for stability in the oil market, in order to obtain fair prices
and to ensure a safe supply of oil for both developed and developing
countries alike, even in complex geopolitical situations.
OPEC’s objectives also include the rational use of petroleum to
preserve the environment, and the struggle against poverty, both in
its Member Countries, and in other states affected by this scourge.
Rational consumption
Increased awareness of the vital role of energy and technological
progress for mankind is giving rise to a new global attitude vis-à-vis the
use of energy resources. It therefore seems due time to talk about a new
energy era marked by consensus on the primary role that hydrocarbons
are now playing — and will continue to play — in the foreseeable future,
and of the effects that the improper use of these resources may cause
to the environment, thus forcing us to think of ways to utilize them more
rationally – both from a quantitative and qualitative standpoint.
Both aspects influence the pricing of hydrocarbons and help ensure
that they are not wasted, that they are conserved and that every effort
is made in order to improve their quality and, consequently, to mitigate
their impact on the environment.
There is already a clear acceptance that the era of low hydrocarbon
and energy prices in general has come to an end, and that it is necessary
to plan the rational consumption of these resources. This will include
not only preventing them from being wasted, but also coordinating and
complementing energy resources that are technically and economically
available today, or that may be envisaged for the future.
A new energy era also poses new challenges and offers fresh oppor-
tunities, which must undoubtedly be taken into account by OPEC, in
its organizational instruments and in the necessary actions it takes to
maintain its institutional usefulness and its outlook for the future.
These challenges and opportunities include the following:
Consolidating the treatment of hydrocarbons:To date, OPEC has fundamentally been concerned with petro-
leum — or liquid hydrocarbons. Gas may be defined as a “brother”
of petroleum. Member Countries possess significant amounts of this
resource, the production of which is, in many cases, inevi-
tably linked to the production of petroleum. At the same
time, the price of gas is influenced by the price of petro-
leum and, for various reasons, gas has gradually been
rising to the position of importance currently occupied
by petroleum. This has led to the need to think of a policy
governing both gas and petroleum resources, including
non-conventional oil, on a consolidated basis.
Coordinating the treatment of all energy resources:
Both hydrocarbons and other forms or energy are inevita-
bly interrelated, which is convenient for mankind. Thus,
any rational use of petroleum and gas will require close
attention to be paid to other energy resources, particularly
renewables. This is so because, while these resources
cannot possibly be provided as alternatives to hydrocar-
bons on a general or massive scale at the present time,
they can, indeed, be used as a supplement — especially
in isolated or distant regions where the task of supply-
ing gas or petroleum may prove to be too problematic or
costly and thus allowing for a more economical applica-
tion and greater conservation of these resources, so as
to prolong their life.
Maintaining the principle of sovereignty over energy resources:
One of the ongoing challenges posed by this new energy
era is maintaining both the principle of national sover-
eignty and public interest over energy resources. For
their part, these principles are aimed at ensuring that
energy resources are developed for the overall benefit
of the nations and, consequently, that they are consid-
ered far more important than mere global trading com-
modities, which are generally earmarked for the benefit
of private concerns and for which efforts are now being
made to globalize.
Investment:The search for, and exploitation of, new deposits,
the refining, storage and transportation of crude and prod-
ucts, and the development of other facilities, all require
significant amounts of investment. Quantifying this
investment and providing the capital needed, through the
creation of financial centres geared specifically towards
oil-related activities, are yet more challenges and oppor-
tunities that must be addressed in the new energy era, in
which we are all immersed. Hence, cooperation between
producers and consumers appears indispensable with
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respect both to the coordination of information and to
the contribution of resources.
Technology:The creation of research and study centres or uni-
versities is one of OPEC’s outstanding challenges. These
centres are a major tool that may be used to gather infor-
mation essential to planning, as well as for moving for-
ward with the development and implementation of tech-
nology, with the purpose of improving the exploration and
extraction of hydrocarbons.
This will ensure the cleanliness of fuels and the use
of the hydrocarbons as raw materials and also for provid-
ing a technical and scientific base on which to build the
quota system and to develop the Organization’s long-
term strategy.
Environmental conservation: Undoubtedly, mankind must search for and find
ways to promote sustainable development, because any
development leading to the destruction of the human
environment is equivalent to collective suicide. The accel-
erated consumption of energy, which is essential to life,
may lie at the core of the destruction of such an environ-
ment if carried out hastily, irrationally and unplanned.
This is an unavoidable challenge and, because it involves
mankind as a whole, must be addressed with two major
objectives in mind:
a) Ensuring that poor countries are able to afford the
energy resources that they essentially need to improve
their living conditions and to overcome backwardness;
b) Promoting the streamlined consumption of energy, so
as to prevent waste and the damaging effects of pol-
lutants. The pricing of hydrocarbons, the implemen-
tation of advanced technologies in refining activities,
and cooperation with the organizations responsible
for environmental conservation are therefore worth-
while instruments that may be used to achieve these
objectives.
Hydrocarbons as raw materials:A new energy era does not mean a necessary reduc-
tion in the importance of hydrocarbons because, while
the role of hydrocarbons has fundamentally been asso-
ciated with energy, and while it is believed that this will
continue to be so in the foreseeable future, hydrocarbons
are simultaneously playing a no less crucial role by serv-
ing as raw materials for a multiplicity of products used for
non-energy-related purposes. The person who coined the
phrase “the Stone Age did not end because of a lack of
stone” purposely meant that the petroleum era could end
long before major reserves of this resource are exhausted,
which in turn is equivalent to a call for the rapid consump-
tion of petroleum, even at low prices.
Besides the fact that such a trend would lead to
unpredictable consequences for the world in economic
and environmental terms, it should be recalled that, at
the end of the stone age, stone did not lose its impor-
tance and it was not stopped from being used mainly
for the production of instruments, including weaponry.
However, stone continued to be highly useful and was
employed for perhaps far nobler purposes, such as con-
structing dams, highways, temples, buildings, housing,
monuments, and works of art.
Likewise, if petroleum should ever cease to have the
use it has today as an energy resource, it may thereafter
be dedicated more intensely to the noble use of a raw
material in the development of a vast range of products
and activities, such as the provision of roads, housing,
clothing, medication and foodstuffs, among others,
that are not only essential, but vital to life on this
planet. This role that hydrocarbons is already playing
is yet another challenge and opportunity that OPEC has
before it.
“The Stone Age did not end because of a lack of stone.”
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6.
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OP
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Peter Odell —
winner of
2006 OPEC Award
and a legend of the global energy sector. She paid trib-
ute to his “unparalleled commitment and contribution”
to the energy industry with over five decades of academic
and research excellence in energy economics.
“This is a man who has devoted his whole life to
research in petroleum economics,” she said.
Ms Lawan Ali pointed out that Odell was a prolific
writer. “He believes in sharing his thoughts and research
Economist, Professor Peter Odell, was the
recipient of the 2006 OPEC Award, which he was handed
by Nigerian OPEC Governor, Ammuna Lawan Ali, during
a special presentation at the Third OPEC International
Seminar.
The award, made every two years, was in recognition
of his lifetime achievement as an energy analyst.
Ms Lawan Ali referred to Odell as a “gift to academia”
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Ms Ammuna Lawan Ali, Nigerian Governor for OPEC and Permanent Secretary at the Nigerian Ministry of Petroleum Resources, held the laudacio for the Award winner, Professor Emeritus Peter Odell.
Presenting the Award to Professor Odell was Dr Edmund Maduabebe Daukoru, OPEC Conference President (r), and Dr Maizar Rahman, Indonesian OPEC Governor, Chairman of the OPEC Board of Governors (c).
findings with the larger academic and research commu-
nity so that knowledge of the industry can be enhanced
globally.
In accepting the award, Odell said he wanted to
express his appreciation of the honour which OPEC had
bestowed upon him in the context of the criteria employed
by the Organization’s Board of Governors in reaching their
collective decision.
“This award to me was totally unexpected and I will
endeavour to ensure that my efforts to understand the
international oil and gas industry continue to meet the
criteria on which the award has been made,” he said.
A Professor Emeritus of the Erasmus University in
Rotterdam, where he was Director of the University’s
Centre for International Energy Studies, his research and
publications on a broad range of economic and geopoliti-
cal issues, relating to global and European energy, date
back to the early 1960’s.
Odell was born in 1930 in Coalville, Leicestershire,
in the United Kingdom, into a family of coal-miners and
railwaymen. His lifetime interest in energy emerged from
that background.
Following three years with Shell International’s
Economic division from 1958, he returned to academia
via the London School of Economics and subsequently in
1968 to a Chair in the Netherlands School of Economics,
now part of Erasmus University in Rotterdam. He retired
from his Directorship of the University’s Centre for
International Energy Studies in the 1990s and now has
the status of Professor Emeritus.
In 1991, he was honoured by the International
Association for Energy Economics for his “outstanding
contributions to the subject and its literature” and in
1994 by the award of the Royal Scottish Geographical
Society’s Centennial Medal for his studies on North Sea
Oil and Gas.
Over the years, he has advised many public and pri-
vate bodies on energy related issues and has lectured
on his research interests at many academic and profes-
sional institutions around the world.
Oil and World Power ran to eight editions and 13
translations between 1970 and 1986. More recently, he
has published a two-volume selected collection of 70
of his studies and commentaries, entitled Oil and Gas:
Crises and Controversies, 1961–2000; and, in 2004, the
book, Why Carbon Fuels Will Dominate the 21st Century’s
Global Energy Economy.
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First — that the current 60 per cent contribution of oil
and gas to world energy supplies will be only modestly
reduced by mid-century; thereafter, hydrocarbons’ contri-
bution to energy demand will slowly decline, but will still
account for over 40 per cent in 2100. By then, however,
natural gas will be two-and-a-half times more important
than oil, though the latter will still be an industry larger
than that of 2000, albeit one which will become up to 90
per cent dependent on non-conventional oil.
Natural gas will undoubtedly become the prime energy
source by the second quarter of the 21st century (streets
ahead of renewables) — initially through a near three-
fold increase in conventional gas production by 2050
and, thereafter, through the rapid exploitation of prolific
non-conventional gas supplies.
Second — that the ultimate physical sufficiency of
global oil and gas resources is not in doubt so that one
can ignore the present-day Jeremiahs. Their predecessors
in the 1960s, the 1970s and the 1980s were all quickly
proved wrong and a similar fate will overcome the so-
called “peak oilers” by the end of the present decade.
Any under-achievement in future oil and gas production
will be the result of a combination of organizational, eco-
nomic, political and environmental factors, all of which
can be overcome, as they always have been in the past
— except for very short-term lapses.
Third — that the current generally accepted wisdom
favouring globalization, liberalization, market competi-
tion and dependence on speculative trading exchanges
(such as the NYMEX and the IPE) for price determination
will soon fall from favour as a consequence of the turmoil
which they have created over the past three years.
This has been to the detriment of consumers the
world over and is having adverse impacts on economic
and social development in many countries, especially in
the developing world. The continuing — albeit modest
— expansion of the world’s demand for oil now necessi-
tates the establishment of an international oil organiza-
tion whereby order can be brought to the markets.
The current unacceptability of this by policy-makers
in the OECD countries will hardly be relevant beyond the
middle of the next decade, in the context of the rapidly
declining importance of these countries in the global oil
system.
Taking part in the final panel discussion of the OPEC International Seminar,
leading economist and Professor Emeritus Peter Odell, the 2006 OPEC Award
winner, set out an eight-point forecast as to what he perceives will be among the
most significant elements in the long-term evolution of the energy industry.
Odell offers eight-pointinsight into future directionof the global energy industry
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Fourth — that oil from non-OECD countries already
accounts for almost 80 per cent of world reserves and
production, with most of this from state-owned or state-
controlled exploration and production facilities. Even
the remaining four largest multi-national oil corpora-
tions already appear unable to secure significant new
production rights, except as minority partners in state-
run systems.
This process is unlikely to be reversed, as all the large
oil-consuming nations of the developing world view self-
sufficiency as a prime objective and will feel assured of
this only in the context of nationally owned and operated
companies.
Fifth — that in such potentially adverse circumstances
for the oil majors, the fact that they have in recent years
been pursuing policies which hardly endear them to coun-
tries in which expanding demands for energy are of the
essence, is not helpful for their survival.
The companies are seen as responsible for high
prices, leading to high profits, from which extortionate
remuneration is paid to their executives and shares are
“bought-back” to enhance their stock-markets’ status,
whilst they make too little investment in new upstream
operations, as they cannot count on a rate of return in
excess of 20 per cent.
Sixth — that as with those majors that have already
failed to survive, so those remaining may well be playing
out their last few years. A Chinese bid for Exxon and/or
Chevron and/or a Russian bid for Shell and/or BP, backed
by funds provided by the wealthy Member Countries of
OPEC, seem likely to be only a matter of time. With the
majors gone, there will be concern in the main OECD
countries for future security of supplies.
In this context, one can reasonably forecast a revival
and/or the resuscitation of their own state-owned oil and
gas industries. The two currently booming and expanding
state oil companies in OECD countries (Statoil of Norway
and ÖMV of Austria), could thus soon have new bedfel-
lows; for example, a new British National Oil Corporation,
a revived Petro-Canada and a de-privatized Total in France/
Belgium.
Seventh — that above and beyond all these devel-
opments, we may anticipate the creation of a UN inter-
national energy organization designed to deal with the
world’s 21st century energy matters. Such an organiza-
tion will, of course, include a major input from a now
more-powerful-than-ever Organization of the Petroleum
Exporting Countries (OPEC), given its Members’ inter-
ests in tomorrow’s much-expanded and ordered global
oil markets.
Eighth — that the world’s continuing regionalized
gas markets will massively expand. In Europe, the cur-
rent obsession for liberalization will be inevitably aban-
doned, as producers wisely insist on long-term contracts
to ensure security of demand in the context of importing
nations’ search for security of supply.
The EU’s current commitments to fully liberalized gas
markets, in general, and, in particular, the UK’s hope-
lessly failed experiment with “perfect competition” for
securing infrastructural developments and low pricing,
will not survive the present decade.
Post-2020, an ordered gas market will emerge, with
continuing long-term benefits based on the near-limit-
less supplies available from a range of gas-rich countries
from Russia, the Caspian region, the Middle East, North
Africa and Norway; and on the consuming countries’ over-
whelming preferences for natural gas over the high-cost
alternatives of renewables and/or nuclear power and the
high CO2 emission levels from the use of oil and coal.
The establishment of a greater European strategic gas
authority will be the precursor to similar developments in
Latin America, sub-Saharan Africa, south-east Asia and
the western Pacific Rim over the first quarter of the 21st
century.
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Rex Tillerson
Professor Sadek Boussena Álvaro Silva Calderón, Dr Alí Rodríguez Araque, Eng Álvaro SilvaDr Purnomo Yusgiantoro
Abdallah S Jum’ah
Hasan Qabazard OPEC Ministers: Naimi, Al Attiyah, Daukoru, Al Hamli, Khelil
Dr Hussain Al-Shahristani, Tariq Aqrawi
HRH Prince Abdulaziz Bin Salman, Jack Moore
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Abdul Aziz Al Turki, Dr Chakib Khelil
Dr Fadhil Chalabi
Dr Rilwanu Lukman, Mutumwa Mawere
Odd Roger Enoksen Martin Marmy
Robin West, David O’Reilly
Dr Martin Bartenstein, Dr Edmund Daukoru
Mohamed Bin Dhaen Al Hamli Guy Caruso, Sadek Boussena
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Seminar gala dinner hosted by NNPC Nigeria
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’‘On behalf of you all, I should like to thank Their
Excellencies the Ministers and Ambassadors, the heads
of international organizations, the chief executives of
national and international oil companies, and all the other
speakers and panel members. Their presence has been
invaluable and, without any doubt, has helped make the
event a great success.
We greatly appreciate the support we have received
from the members of the media, in covering our activi-
ties. It is very important that the views expressed here
are disseminated to a wider readership and audience,
and clearly this task has been in very capable hands.
We are also grateful to all those who have been
involved in the organisation of the event. While they
As two-day OPEC Seminar draws to a close ...
Daukoru says a big
are too numerous to name individually, prominent
among them are the CWC Group and members of the
Seminar’s Steering Committee, under the able leader-
ship of Mohammed S Barkindo, Acting for the Secretary
General, Organizing and Technical Committees, as well
as all Secretariat staff that spent much time and effort to
see this seminar through. The authorities of the Congress
Centre of the Hofburg Palace, the Austrian security forces
also deserve our gratitude. And finally, of course, we can-
not fail to thank our hosts, the government of the Federal
Republic of Austria and the good people of Vienna for
their excellent hospitality, as well as the attendance of
the Economy and Labour Minister, Dr Martin Bartenstein,
whose contribution we highly value.
In his closing remarks to the seminar, OPEC Conference
President, Dr Edmund Maduabebe Daukoru,
had this to say about the event’s participants
and organizers:
thank youto all involved
87Some of the staff from OPEC and the CWC group, who worked so tirelessly to make the seminar a success.
Mohamed Meziane,
CEO, Sonatrach
Tareq Amin
Dr Martin Bartenstein, Dr Edmund Daukoru
Professor Peter Odell, Dr Omar Farouk Ibrahim
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1. An average of Saharan Blend (Algeria), Minas (Indonesia), Iran Heavy (IR Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (SP Libyan AJ), Bonny Light
(Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (United Arab Emirates) and BCF-17 (Bachaquero, Venezuela).
This section includes highlights from the OPEC Monthly Oil Market Report
(MOMR) for September published by the Research Division of the Secretariat,
con tain ing up-to-date anal y sis, ad di tion al in for ma tion, graphs and tables.
The publication may be downloaded in PDF format from our Web site
(www.opec.org), provided OPEC is cred it ed as the source for any usage.
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Crude oil price movements
OPEC Reference Basket
The market emerged in August on a bullish
note, due to a supply disruption from Russian’s
Druzhba pipeline amid escalating tensions in
the Middle East. During the first week of August,
the OPEC Reference Basket1 (ORB) surged by
$1.75 to settle at $70.35/b. The threat of Tropical
Storm ‘Chris’ in the Gulf of Mexico added to
the bullish market sentiment. In the second
week, a pipeline shutdown at BP’s 400,000
b/d Prudhoe Bay oil field in Alaska added to
the upward price trend. Moreover, a bullish
US crude oil inventory report heightened mar-
ket concerns. It resulted in the ORB leaping by
$1.56 over a two-day period to a record high
of $72.67/b. However, some calm was restored
in the market as a result of a thwarted airline
attack in the UK, which was seen potentially
as reducing demand for transportation fuels,
and news that BP would be able to maintain
half of its Alaskan North Slope output, coupled
with a recovery in some Nigerian and North Sea
production. The ORB subsequently dropped
by $2.20 over a two-day period to average
$71.71/b for the second week of the month.
Prices fell further in the third week amid
easing fears of a supply shortfall and a lack
of new developments in the marketplace. A
downward revision of OPEC’s demand forecast
supported the market perception that supplies
were ample. As a result, the ORB drifted some
distance from its record peak, falling by $3.59
to average $68.13/b.
Revived tensions in the Middle East momen-
tarily pushed the ORB 90¢/b higher on the first
day of the fourth week, although the impact was
short-lived. Market volatility continued on the
approaching Tropical Storm ‘Debby’ at a time
when the effects of geopolitics in the Middle
East were heightening, offsetting any further
downward pressure. Hence, the ORB was
46¢ lower in the fourth week to stand at an
average of $67.67/b. Reduced concern over
Tropical Storm ‘Ernesto’ in the Caribbean,
as it by-passed oil infrastructure in the Gulf
of Mexico, calmed market sentiment further.
The ORB plunged $2.07/b in one day. Ample
winter fuel stocks in Japan instilled confidence
in the Asian market, while weaker refining mar-
gins, amid a lack of arbitrage opportunity in
Europe, kept the bears intact, at a time when
rising West African exports were imminent.
On a monthly basis, the ORB closed August at
$68.81/b, a decline of 9¢ compared with July.
With the downward trend continuing into
September, as a result of an easing of Middle
East tensions, lower refinery run rates in Asia,
due to weaker margins, and signs of ample sup-
ply of winter fuels in the final days of the United
States driving season, the ORB dropped below
$61/b for the first time in nearly six months
when it closed at $60.89/b on September 11,
falling even further to $59.22/b three days
later.
US market
The US market was underpinned by healthy
procurements amid robust refining margins and
tight supplies from the North Sea and West
Africa. Depleting gasoline stocks amid con-
cern over light product supply with storms in
the Atlantic supported light crude differentials.
The sweet/sour spread narrowed to $1.71/b,
compared with late July, with the weekly aver-
age for the WTI/WTS spread at $3.82/b. The
sweet/sour spread continued to find support
into the second week on supply disruptions
from BP’s Alaska oil field. Nevertheless, the
foiled terrorist attack in the UK, implying lower
demand for air transport fuels, kept a cap on
the narrowing spread.
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Table A: Monthly average spot quotations for OPEC’s Reference Basket
and selected crudes including diff erentials $/b
Jul 06 Aug 06 Aug/Jul 2005 2006
OPEC Reference Basket 68.89 68.81 –0.09 49.03 63.16
Arab Light1 69.06 68.76 –0.30 48.35 63.07
Basrah Light 66.49 65.42 –1.07 47.15 60.03
BCF-17 58.72 60.29 1.57 37.56 53.83
Bonny Light1 75.49 75.29 –0.20 53.47 69.37
Es Sider 71.42 70.72 –0.69 50.23 65.56
Iran Heavy 66.59 66.42 –0.18 46.23 61.38
Kuwait Export 66.35 66.02 –0.33 45.70 60.94
Marine 70.21 70.05 –0.16 48.29 64.63
Minas1 74.13 75.42 1.29 52.75 68.16
Murban 73.70 73.66 –0.04 51.94 67.83
Saharan Blend1 74.37 74.50 0.14 52.52 68.45
Other crudes
Dubai1 69.17 68.92 –0.25 47.23 63.37
Isthmus1 68.30 67.47 –0.83 48.31 62.34
Tia Juana Light1 60.93 60.99 0.07 44.43 56.77
Brent 73.66 73.11 –0.55 52.56 67.65
West Texas Intermediate 74.33 73.01 –1.32 54.16 68.59
Diff erentials
WTI/Brent 0.67 –0.10 –0.77 1.60 0.94
Brent/Dubai 4.49 4.19 –0.30 5.33 6.25
Note: As of the third week of June 2005, the price is calculated according to the current Basket methodology
that came into effect as of June 16, 2005. BCF-17 data available as of March 1, 2005.
1. Old Basket components: Arab Light, Bonny Light, Dubai, Isthmus, Minas, Saharan Blend and T J Light.
na not available
Source: Platt’s, direct communication and Secretariat’s assessments.
The WTI/WTS differential narrowed in the
second week to $3.38/b. Nevertheless, in the
third week, prompt supplies were adequate to
meet demand as full storage capacity of Mars
crude forced producers to sell prompt bar-
rels at lower prices. A hefty draw on gasoline
stocks kept some balance in the US market amid
approaching autumn refinery maintenance and
moves to begin stockpiling for winter fuels, as
well as concerns over the implementation of
higher specifications for light products. The
WTI/WTS spread widened by 93¢ to $4.31/b.
The bearish sentiment continued into the fourth
week on ample supply of Mars crude. The WTI/
WTS spread rose 37¢ to $4.68/b.
In the final week, the resumption of BP’s
Alaska Prudhoe oil production calmed market
fears of a supply shortfall. The weak level for
Mars crude supported buying interest; how-
ever, there was an expectation that softening
European refining margins would draw North
Sea cargoes across the Atlantic. The WTI/
WTS spread inched up 5¢ to $4.73/b. The WTI
monthly average in August was $73.08/b, a
$1.28 drop from July, with the premium over
WTS falling to $4.19/b, 14¢ lower.
North Sea market
The North Sea market emerged on a strong
note in the first week amid tight supply, pushing
the backwardation curve steeper and widening
the sweet/sour spread. However, sentiment
eased on the scheduled return from mainte-
nance of BP’s Forties pipeline. In the second
week of the month, the market softened on
unsold prompt cargoes as refiners had already
fulfilled their requirements.
The larger volume in the September load-
ing programme added to the differential weak-
ness. The bearishness continued in the third
week on poor refining margins amid a lack
of activity. Continued lingering August bar-
rels amid unsold first-decade September car-
goes extended the downward pressure in the
fourth week. In the final week, a lack of arbi-
trage opportunities for North Sea westbound
crude added to the bearish momentum. Dated
Brent’s monthly average was $73.21/b, 36¢
lower than in July.
Mediterranean market
The market in the Mediterranean emerged
on a weak note as demand for sour grades was
buoyant to sweet crude with the Urals spread
under Brent 92¢ wider at $5.67/b. Nevertheless,
the disruption at BP’s Alaska oil field drew some
support for Mediterranean crude as an alterna-
tive supply. The spread under Brent improved
slightly to $5.58/b in the second week. Weak
refining margins continued to pressure Urals
crude amid ample supply. However, improved
margins in the Mediterranean lent support to
the grade amid barrels moving from the south
to the north. Urals was on a firmer note to Brent
with the spread at $4.90/b under the bench-
mark in the third week. Continued improved
refining margins supported Urals as refiners
turned to meet winter heating oil needs. The
Urals spread under Brent narrowed to $4.02/b
in the fourth week and to $3.21/b in the final
week. The August Urals average was $68.53/b,
yet the discount under Brent was 31¢ wider at
$4.68/b.
Middle Eastern market
A poor crack spread for fuel oil on a hefty
arbitrage inflow amid softening Chinese
demand saw the Middle Eastern market weaken
in early August. Ample supply and a record-
high official selling price (OSP) exerted further
pressure on price differentials for Middle East
grades. October Oman was on offer at a 3¢ pre-
mium, while it was bid at a 3¢ discount to MOG
amid some unsold September stems in the first
week. However, in the second week, BP’s clo-
sure of its Alaskan oil field supported the grades
on the prospect of moving some Middle East
crude westwards. October Oman was sold at a
22¢ premium to MOG, while Abu Dhabi Murban
was on offer at a 45¢ premium to ADNOC’s OSP.
Nevertheless, the partial resumption at BP’s
Prudhoe Bay oil field helped October Oman
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premium to their respective OSPs. In the third
week, a narrowing Brent/Dubai spread added
to the bearish market sentiment. The weakness
continued into the fourth week on ample supply,
due to the delayed start-up of the Sohar refin-
ery. October Oman was assessed between a 5¢
discount and at parity to MOG, while Murban
was valued at a 10–20¢ premium to OSP. In the
final week, lingering October barrels continued
to pressure Middle East crudes amid the weak
fuel oil crack spread. October Oman was seen
trading at a 20¢ discount to MOG, while Murban
saw a 5¢ premium to ADNOC’s OSP.
Asian market
Slow demand from Japan’s power plants,
due to healthy exports of alternative feedstock,
led to the Asia/Pacific market softening at the
start of the month. Indonesia’s Duri plunged to a
discount of around $2.00–2.50 from minus 35¢
to ICP. The market weakened further on India’s
naphtha exports and lower Chinese demand for
fuel oil. Although the market was supported by
outages from the Alaska oil field, softer naph-
tha values prevented any further firmness in
regional sweet crude in the second week. In
the third week, demand from the US West Coast
eased as BP contemplated returning half of
the crude shut in at Prudhoe Bay. The market
became more bearish as a result of procure-
ments of western crude by India and China. A
new rival crude — Sokol from Sakhalin — began
trading, putting further pressure on the market.
Product markets and
refinery operations
Product markets continued to lose their ear-
lier strength on slowing demand, along with
higher production and the end of the driving
season in the US, which changed product mar-
ket sentiment significantly across the globe and
put downward pressure on refining margins.
Margins for WTI crude on the US Gulf Coast
dropped by $2.55 to $11.39/b from $13.94/b
in July. Europe saw a similar trend as Brent’s
margins plummeted to $3.80/b from $6.27/b
the previous month. The refinery margin for
benchmark Dubai crude in Singapore saw a
softer decline than the Atlantic Basin bench-
mark in August, but it continued its previous
downward trend to reach $3.35/b from $4.26/
b in July.
The continuation of the bearish momentum
in the gasoline and fuel oil markets appeared
likely to exert more downward pressure on
refinery margins in September. However, the
market for middle distillates remained rela-
tively strong, a situation that could continue.
Furthermore, larger-than-usual refinery main-
tenance in Europe during autumn and the tran-
sition to ultra-low sulphur diesel (ULSD) in the
US, effective in October, could also give some
support to product and crude prices in the
future.
Impressive margins have encouraged refin-
ers to increase their throughput levels over the
last few months and upon completion of the
maintenance schedule, they have been boosted
further. The refinery utilization rate in the US
rose to 92.3 per cent in August from 91.3 per
cent in July, the highest level since Hurricanes
Katrina and Rita struck last year. In Europe, the
utilization rate rose to 87 per cent from 85.6
per cent in July. Due to the busy maintenance
schedule and falling refining margins, European
plants could reduce throughputs in the near
future. As far as Asian refineries are concerned,
their utilization rates surged significantly in
August, but the bearish developments in the
gasoline and fuel oil markets may force them
to cut their current throughput levels. In this
respect, Japanese refiners have reduced their
throughput levels very slightly of late, while
their combined utilization rate soared to 89.6
per cent in August from 84.3 per cent in July.
US market
Gasoline stock-builds over the last few
weeks, along with comfortable middle distil-
late inventory levels and the easing of hurri-
cane threats, have led to the decline in crack
spreads for light products, especially the gaso-
line spread against benchmark WTI crude in
different regions of the US.
The weekly spread of premium gasoline on
the US Gulf Coast fell sharply from $41.85/b at
the beginning of August to $7.35/b one month
later. Part of these losses can be attributed to
the liquidation of conventional reformulated
gasoline contracts by financial market players.
Distillate prices have also weakened in
the US, but did not drop as much as gasoline
prices. The distillate premium over gasoline
continued to soar, and it may surge again in
the future amid increasing support from sea-
sonal factors. Additionally, the continued shift
to ULSD in the US may raise supply constraints
and logistical problems in some regions, lifting
diesel prices.
As far as the fuel market is concerned,
declining demand from utility plants retained
the highly discounted prices for low- and high-
sulphur fuel oil. In the next few months, the low
price of natural gas may remain bearish, com-
pared with the fuel oil market.
European market
Bearish developments in the US gaso-
line market, combined with the higher cost of
Brent crude, put downward pressure on refin-
ery margins in North-West Europe and the
Mediterranean. The end of the US driving season
and the closing of arbitrage opportunities may
negatively affect product markets and refining
margins in Europe in the next few months. The
crack spread of gasoline declined significantly
over the last few weeks to reach $11.88/b on
September 8 from $27.33/b early in the previ-
ous month.
Among the remainder of the barrel compo-
nents, middle distillates, especially jet/kero, are
still firm due to stronger demand across Europe
and tight supplies after a sharp drop in exports
from the Baltic since the beginning of August. In
line with these developments, the jet/kero crack
spread against Brent crude in Rotterdam rose to
$21.06/b recently from $16.07/b on August 4.
Similarly, the gasoil spread surged from $14/b
to about $18/b in early September.
The performance of the bottom of the barrel
complex for both low- and high-sulphur grades
was still disappointing and, due to closed oppor-
tunities to Asia, may suffer further in the com-
ing months.
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The middle
distillate market
could maintain its
strength as China
continues to buy
ample jet fuel ...
Asian market
The bearish sentiment of the Asian mar-
ket, which was triggered by the extended rainy
season in North-East Asian countries, was con-
solidated by the return of refineries to normal
operation and increasing supplies of differ-
ent products. The closed arbitrage to the US
West Coast and soft local demand have over-
shadowed the positive impact of lower gaso-
line exports by China. Its weekly crack spread
against benchmark Dubai crude slid to $3.75/b
on September 8 from $16.34/b in early August.
The naphtha market has followed suit, as ample
exports by India and sluggish demand from
Japan and South Korea, due to cracker plant
maintenance, put pressure on naphtha prices.
Despite the downward momentum of gaso-
line, the middle distillate market could maintain
its strength as China continues to buy ample
jet fuel amid the expectation of increasing air
travel during the ‘Golden Weeks’ in October.
Similarly, gasoil might find some support from
increasing demand by the agricultural sector.
The weekly spread of gasoil versus Dubai crude
recently widened to $21.15/b from $18.31/b
early in August. Looking ahead, it is expected
that the middle distillate market will remain
relatively strong in the next few months, due
to higher demand for winter heating and from
the agricultural sector.
With regard to fuel oil, although regional
demand for bunker and industrial purposes has
improved, it failed to offset the negative impact
of huge regional production and imported car-
goes from the rest of the world. The crack spread
of high-sulphur fuel oil versus Dubai crude
recorded a figure of minus $19.37/b, compared
with minus $17.61/b in early August.
The oil futures market
The rally continued further in the futures mar-
ket on concern over the output recovery from
West Africa amid a rise in gasoline demand.
Geopolitical tensions in the Middle East added
to the bullish market sentiment. The first week’s
data for the CFTC revealed that non-commer-
cials raised long positions and reduced shorts
to leave net longs 5,800 lots higher at 66,100
contracts. Open interest saw a healthy build
of 58,500 contracts to peak over the 1.1 mil-
lion level for the first time at 1,110,000 lots.
The Nymex front month contract closed at
$74.91/b.
Moreover, Tropical Storm ‘Chris’ approached
the Caribbean Sea threatening oil infrastructure
in the Gulf of Mexico, but then waned later
in the week. The Nymex WTI prompt month
peaked at $76.98/b on the unexpected shut-
down of BP’s Prudhoe Bay oil field in Alaska
due to pipeline problems. The CFTC reported
in the second week that non-commercials had
increased their long positions at twice the
rate as shorts. Net longs were 4,400 wider at
70,500 contracts, with open interest accumu-
lating another 55,100 lots to close near the 1.2
million level at 1,165,000 contracts.
In the third week, gasoline stocks suffered a
hefty drop and crude oil stocks saw draws amid
disrupted Alaskan supplies. Non-commercial
short positions declined a significant 14,600
lots, while longs dropped a moderate 1,300
lots. Net long positions were up a considerable
13,300 lots to nearly 84,000 contracts — the
highest level since May. Nonetheless, the failed
attack on airlines in the UK — which led to the
anticipation of lower demand for transporta-
tion fuels — triggered some fund sell-offs for
profit-taking with the Nymex WTI front month
contract closing at $73.05/b. Open interest
rose by an additional 45,000 lots to register a
record-high of 1,210,000 contracts.
The market continued to be bearish in
the fourth week on concern over the Alaskan
pipeline outage, but this situation eased as BP
recovered some 50 per cent of its production,
amid the partial return of supply from Nigeria.
Non-commercials liquidated a hefty 13,000
lots of long positions, while shorts saw a mod-
erate build of nearly 2,000 lots. As a result,
net longs fell a significant 15,000 lots to some
69,000 contracts. Open interest decreased by
a hefty 87,000 contracts to stand at 1,123,000
lots. However, the Nymex front month contract
closed marginally higher at $73.24/b on concern
over winter fuels amid heightened tensions in
the Middle East.
In the final week of the month, unexpected
builds in US gasoline and distillate stocks
weighed on the market. The new monthly
futures contracts plunged below the $70/b level
for the first time in over two months. The CFTC
report revealed the liquidation of non-commer-
cial longs while shorts piled up. Thus, net long
positions were some 13,500 lots narrower at
60,900 contracts, while open interest rose a
marginal 27,000 lots to 1,150,000 contracts.
The monthly average for the Nymex WTI
front month contract was $73.08/b, which was
$1.41/b lower than in July. Non-commercial net
positions averaged around 70,000 lots, nearly
15,000 higher than the previous month and
almost 43,000 higher than last year. Open
interest was at 1,150,000 contracts, 98,000
more than last month and over 252,000 con-
tracts higher than last year.
The forward structure
The near-month contango in the forward
structure remained broadly unchanged. The
1st/2nd month average spread was 6¢ nar-
rower at $1.19/b. However, the further forward
month spreads widened, with the 1st/6th, 12th,
and 18th month average spreads at $3.55/b,
$4.33/b, and $3.79/b, representing increases
of 40¢, $1.04 and $1.31. Nevertheless, aver-
age weekly crude oil stocks in the US were at
332 million barrels, some 3m b lower than in
July, in part due to BP’s Alaska pipeline outages.
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1Q 2Q 3Q 4Q Year Growthy-o-y
2003 5.87 6.75 6.72 6.61 6.49 0.91
2004 7.17 7.30 7.38 7.37 7.31 0.82
2005 7.45 7.69 7.76 7.85 7.69 0.38
20061 7.98 8.41 8.35 8.30 8.26 0.57
20071 8.48 8.98 8.91 8.73 8.78 0.51
1. Fore cast.
Table C: OPEC NGL production, 2002–07
2003 2004 2005 05/04
3.71 4.02 4.09 0.07
1Q06 2Q06 3Q06 4Q06
4.20 4.24 4.33 4.36
2006 06/05 2007 07/06
4.28 0.19 4.54 0.25
m b/d
However, stocks remained some 10m b over the
same period last year.
The tanker market
OPEC spot fixtures in August declined for the
second consecutive month to average 13.0m
b/d, down 600,000 b/d from the previous
month, but still 500,000 b/d above a year
earlier. Over two months, OPEC spot fixtures
dropped 1.5m b/d, resulting in a three per cent
decline in OPEC’s share in total spot fixtures,
which stood at 64 per cent, the lowest level in
five months. When compared with a year earlier,
however, the share of OPEC fixtures remained
unchanged. The decline in spot fixtures was
driven by the drop in Middle East/Asia fixtures,
particularly from China, which had set a pro-
gramme of refinery maintenance in August/
September. However, fixtures from the Middle
East (including non-OPEC Countries) to Asia
lost 900,000 b/d to average 5.0m b/d, while
spot fixtures from the Middle East westbound
rose 500,000 b/d to 2.3m b/d, the highest level
since January, due particularly to strong imports
from the US, supported by the partial outage at
the BP Prudhoe Bay field. Despite the decline of
August, total Middle East spot fixtures remained
1.1m b/d higher compared with a year earlier.
In contrast, non-OPEC spot fixtures recov-
ered from the decline of the previous month
and increased 700,000 b/d to average 7.3m
b/d, corresponding to year-on-year growth of
200,000 b/d. As a result, global spot fixtures
(OPEC and non-OPEC) remained virtually sta-
ble at 20.3m b/d, but this was 700,000 b/d up
from a year earlier.
Following the same trend, OPEC sailings
dropped 1.0m b/d to average less than 23.2m
b/d, the lowest level in 20 months. The strong
decline was essentially the consequence of the
900,000 b/d decrease in chartering seen the
previous month.
Preliminary data showed that arrivals at the
US Gulf Coast, East Coast and the Caribbean
reached a record-high of 11.9m b/d, after a
630,000 b/d increase in August, while arrivals
at the Euro Mediterranean basin rose 180,000
b/d to average 4.5m b/d, 300,000 b/d lower
than a year earlier. In contrast, North-West
Europe saw arrivals drop by almost 500,000
b/d to average 7.6m b/d, down 200,000 b/d
from a year ago.
Strong activity from charters in the sum-
mer continued to support the crude oil tanker
market and pushed average freight rates in
August to higher than historical levels. Usually,
August is considered one of the months when
spot freight rates hit their lows during the year,
but it was not the case in 2006 due to strong
activity from charters. In the VLCC sector, long-
haul Middle East/eastbound and westbound
spot freight rates remained stable at Worldscale
132 and W96, respectively, but when compared
with the corresponding month last year, rates
were almost double on the Eastern route and
more than 50 per cent higher on the Western
route. It should be noted that rates surged sig-
nificantly following BP’s decision to partially
shut its crude oil production from Prudhoe Bay.
The problems at the field forced BP to look for
additional vessels to compensate for the lost
production by importing from other regions to
the refineries on the West Coast. As a conse-
quence of the lower tonnage availability, freight
rates for tankers moving from the Middle East
and Asia surged by more than W40 points, or
20 per cent, between the first and the second
week of August. By the end of the month, VLCC
freight rates started to soften after it appeared
that the loss from BP’s oil field would be lower
than expected which, combined with a slow-
down in activity from Chinese buyers due to
refinery maintenance, increased the availabil-
ity of tankers. In addition to sustained activity
from the US and China, Iran’s reported use of
ten VLCCs as floating storage helped keep the
tanker supply tight in the summer, helping rates
to stay strong in August. The Suezmax sector
performed better than in the previous month,
due to healthy activity from the US. However,
freight rates on the West Africa/US Gulf Coast
and the trans-Atlantic routes rose by around 12
per cent to average W176 and W169, respec-
tively, their highest levels since February. When
compared with a year earlier, both routes dis-
played a 66 per cent year-on-year increase.
Similarly, freight rates of Suezmaxes mov-
ing from West Africa to the US Gulf Coast
increased suddenly between the first and sec-
ond week of August, following BP’s output dis-
ruption. Rates gained on average W40 points,
or 25 per cent, in just one week. Contrary to
VLCCs and Suezmaxes, the Aframax sector
showed a mixed pattern with freight rates on
the Indonesia/US West Coast route continuing
their upward trend and increasing for the sec-
ond consecutive month to average W223, a gain
of 21 points, or ten per cent, over the previous
month. Freight rates within the Mediterranean
basin, as well as from the Caribbean and the
US East Coast, remained stable at around W182
and W205, respectively.
However, freight rates on the Mediterranean/
North West Europe route lost W25 points, or 12
per cent, to stand at a monthly average of W182.
The decline observed on the latter route was due
to excess tonnage as a result of lower activity
from charters in anticipation of strong refinery
maintenance in the coming months in North-
West Europe. Compared with a year earlier, all
routes enjoyed much better rates, except for
the Mediterranean basin, where rates were
similar.
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Table D: OPEC crude oil production, based on secondary sources 1,000 b/d
2004 2005 4Q05 1Q06 2Q06 Jun 06 Jul 06 Aug 06 Aug/ Jul
Algeria 1,228 1,349 1,374 1,376 1,368 1,357 1,352 1,359 7.3
Indonesia 968 942 935 922 914 906 894 880 –13.3
IR Iran 3,920 3,924 3,911 3,849 3,800 3,835 3,918 3,904 –13.5
Iraq 2,015 1,830 1,675 1,711 2,001 2,120 2,065 2,054 –10.8
Kuwait 2,344 2,504 2,548 2,532 2,513 2,517 2,507 2,513 6.3
SP Libyan AJ 1,537 1,642 1,665 1,680 1,699 1,702 1,708 1,712 3.7
Nigeria 2,322 2,412 2,469 2,257 2,212 2,277 2,213 2,219 6.1
Qatar 771 796 808 817 820 823 826 840 14.5
Saudi Arabia 8,957 9,390 9,426 9,416 9,133 9,129 9,183 9,226 42.7
UAE 2,360 2,447 2,518 2,528 2,535 2,540 2,571 2,558 –12.8
Venezuela 2,582 2,633 2,584 2,595 2,574 2,555 2,461 2,521 60.2
OPEC-10 26,988 28,038 28,237 27,973 27,570 27,640 27,631 27,732 101.2
Total OPEC 29,004 29,868 29,912 29,684 29,570 29,759 29,696 29,786 90.4
Totals may not add, due to independent rounding.
For the period January–August 2006, aver-
age freight rates in the VLCC and Suezmax sec-
tors were 10–25 per cent higher, depending on
the route.
Clean tankers saw mixed patterns in August
with East and West markets moving overall in
opposite directions. Contrary to the previous
month, spot freight rates for tankers doing
business in the East jumped by around 38 per
cent. In contrast to the previous month, all
routes weakened in the West, apart from the
Caribbean/US Gulf Coast route. Due to tight
tonnage availability in the region, freight rates
on the Middle East/Asia and the Far East routes
rose W71 and W93 points, respectively, to aver-
age W273 and W337.
Freight rates in the East of Suez have fol-
lowed a steady upward trend since the begin-
ning of the month. In the West of Suez, freight
rates on the Caribbean/US Gulf Coast route rose
W15 points to average W350, the highest level
since January. The exceptional growth on this
route, compared with the other routes in the
West, was essentially due to sustained activ-
ity as a result of BP’s partial oil field shut-in,
which kept rates hovering around W350 over
the month.
In contrast to the Caribbean/US Gulf Coast
route, rates within the Mediterranean and from
there to North-West Europe fell W33 points, or
11 per cent each, to average W263 and W273,
respectively. Freight rates on the trans-Atlantic
route edged lower by W8 points, or three per
cent, to W304. Nevertheless, despite the decline
in the East of Suez, freight rates on all routes per-
formed better than a year ago, particularly in the
West where rates were 40–70 per cent higher.
World oil demand
World oil demand in 2006
World oil demand in 2006 is estimated to
average 84.4m b/d, representing growth of 1.2m
b/d, or 1.4 per cent. As a result of slower-than-
expected economic growth in the first half of
the year, the world oil demand growth estimate
for the year has been revised down by 100,000
b/d since the last report.
The US is pushing its strategy to diver-
sify sources of energy and latest efforts are to
encourage greater use of biofuels in the energy
system.
Above average temperatures in the sum-
mer in China, along with an unusual boom in
car sales, helped drive up oil demand. While
new efforts by the government to take the heat
out of the economy could impact on future oil
The US is pushing its
strategy to diversify
sources of energy and
latest efforts are to
encourage greater
use of biofuels in the
energy system.
demand, China has found achieving its planned
energy conservation goal of reducing consump-
tion by four per cent this year to be more diffi-
cult than expected. The cabinet issued guide-
lines recently to remind officials to meet this
target. China’s National Development Reform
Commission (NDRC) suggested that increas-
ing the share of both the service and high-tech
sectors by one per cent in the economy would
reduce energy consumption by one per cent.
The government also plans to look at the energy
price structure. However, despite these efforts,
China’s oil demand increased by more than 11
per cent in the second quarter.
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World oil demand in the second quarter
was weaker-than-expected early in the year.
Recent data for OECD oil demand showed a
decline in the second quarter. Despite the stabi-
lization of gasoline prices, the latest data from
the US revealed that the nation’s summer gaso-
line demand grew by only 0.68 per cent, which
was below the 1.6 per cent annual average.
Therefore, North America’s second- and third-
quarter oil demand has been revised down by
200,000 b/d and 100,000 b/d, respectively.
Furthermore, higher oil prices have encouraged
power plants to switch to less expensive natural
gas, which is considered to be one of the main
factors behind sluggish US oil demand so far
this year. According to the weekly EIA report,
August year-on-year oil demand was down by
90,000 b/d. Residual fuel oil experienced the
highest decline of 35 per cent since the same
period last year. In total, the OECD countries’
year-on-year third-quarter oil demand growth
is estimated at 300,000 b/d.
Chinese data showed strong consumption,
which, along with Middle Eastern oil demand
growth, helped to offset the expected decline
in OECD countries in the third quarter.
OECD Europe
Despite the improved outlook for European
economies for the rest of this year, oil demand
did not keep pace with economic growth. The
past cold winter affected oil demand positively,
not only in the first three months, but also in
the second quarter. Therefore, OECD Europe’s
year-on-year second-quarter oil demand growth
was revised up by 100,000 b/d. Low summer
gasoline consumption and fuel switching by
European power plants were the main reasons
behind the sluggish oil demand in the third
quarter. Although German oil product sales
showed year-to-date growth of almost 1.5 per
cent, July sales were 0.7 per cent lower than
the same month last year. OECD Europe’s third-
quarter oil demand is estimated to grow by
only 20,000 b/d.
OECD Pacific
South Korean oil imports rose by eight per
cent year-on-year in July, up from only three
per cent in June, while total oil demand rose
by only 0.6 per cent. However, a recent tax
hike caused diesel consumption to decline by
almost 19 per cent in July. It is important to
note that the recent move by power plants to
substitute gas for liquids has affected fuel oil
demand, causing it to decline by 38 per cent in
July year-on-year. Although Japanese oil prod-
uct sales for July were ahead of June, July year-
on-year sales were down by 0.7 per cent. High
gasoline prices, along with bad weather during
the summer driving season, curbed year-on-
year gasoline demand growth in July to only
1.4 per cent. As has been seen elsewhere, high
oil prices encouraged Japanese power plants
to switch to natural gas, causing fuel oil con-
sumption to decline six per cent year-on-year
in July. Oil demand in the OECD Pacific region
as a whole is expected to show meager growth
of 40,000 b/d in the third quarter.
Developing countries
Strong economic growth in the Middle
Eastern countries continues to drive up oil
demand. Third-quarter year-on-year oil demand
growth is estimated at 300,000 b/d to average
to 6.3m b/d for the Middle East.
Oil demand in the ‘Other Asia’ region is
picking up more than expected, despite the fact
that some Asian countries, such as Thailand, are
pushing for alternative fuels. So far this year,
the use of alternative fuels in Thailand has
increased three-fold. Continuing efforts by the
Thai government to reduce oil demand through
the improvement of alternative fuels will affect
oil demand, but only to a certain degree.
The Taiwanese economy sought more oil
with demand for the first six months of the
year growing by almost four per cent. Naphtha
demand increased in the first half by 23 per cent
year-on-year. However, high oil prices seem to
have negatively affected gasoline demand so
far this year.
Other regions
China’s economy grew by more than 11
per cent in July, resulting in a trade surplus of
$14.6 billion. This led to oil consumption ris-
ing by eight per cent in comparison to the same
month last year. The strong increase in demand
was fuelled by the unusually high temperatures
and the large increase in car sales. In the first
seven months of the year, oil demand grew by
650,000 b/d, or ten per cent year-on-year. Car
sales over the same period were up by more than
a third. The transportation sector is considered
one of the main drivers of oil demand in China.
Fuel oil imports jumped by half in July, a devel-
opment attributed to the above average summer
temperatures. In the first seven months of the
year, crude runs grew by six per cent year-on-
year, leading to oil import growth of 16 per cent
over the same period. Recent data also shows
stronger second-quarter demand than previ-
ously forecast, resulting in an upward revision
of 70,000 b/d in growth for that quarter.
Despite newly imposed export taxes, FSU
oil exports increased. This occurred as a result
of high oil prices and affected apparent demand
more than anticipated, leading to a downward
revision of 60,000 b/d in demand growth in
the second quarter.
Forecast for 2006 demand
OECD
In North America, oil demand growth in
the fourth quarter of this year is expected to be
somewhat stronger than in the first three quar-
ters, given the stabilization of gasoline prices
and the expectation of normal weather in the
fourth quarter. However, the slowing economy,
along with high oil prices, has impacted on oil
In the first seven
months of the
year, Chinese oil
demand grew by
650,000 b/d.
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demand growth, leading to a downward revi-
sion of 100,000 b/d for the region. The very
hot summer in the US, which put more pres-
sure on electricity demand, failed to boost oil
demand as there was major fuel switching by
power plants from liquids to gas. Moreover, the
summer peak for gasoline demand was not as
strong as expected.
Oil demand in OECD Western Europe is pro-
jected to increase by just 30,000 b/d to average
15.5m b/d in 2006. OECD Pacific oil demand
is expected to increase in the fourth quarter,
but by not as much as previously forecast. Slow
industrial production is causing oil demand to
weaken further, resulting in a downward revi-
sion of 100,000 b/d in fourth-quarter demand
growth. OECD Pacific demand is now expected
to grow 130,000 b/d in the fourth quarter.
Developing countries
Developing countries are accounting for 92
per cent of world oil demand growth in 2006. In
Other Asia, the negative effects of the removal
of price subsidies has eased in the third quar-
ter. Pakistan’s diesel demand is forecast to jump
seven per cent this year. Due to fuel substitution
and conservation, mainly in India, Other Asia’s
oil demand growth for the year is estimated to
reach only 120,000 b/d. Developing countries’
oil demand is expected to grow 600,000 b/d
for the year to average 23.1m b/d. The strong
economic activities in the Middle East are
expected to continue until year-end. Oil demand
for the Middle East is expected to increase by
300,000 b/d in 2006 to average 6.2m b/d.
Other regions
China’s accelerating economy has exceeded
all expectations with GDP growth estimated at
10.2 per cent for the whole of 2006. The August
trade surplus reached a record-high $18.8bn.
This overwhelming economic achievement has
had an effect on oil demand this year. Barring
a major push by the government to curb oil
demand, growth will reach 8.3 per cent by the
end of the year. China’s oil demand growth
should remain strong and increase by 500,000
b/d to average 7.1m b/d in 2006. China’s plan
to develop the country’s rural areas will be one
of the factors driving higher energy consump-
tion over the remainder of this year.
Forecast for 2007 demand
The world oil demand growth forecast for
2007 remains unchanged. Due to adjustments
in 2006, the absolute level was revised down
by 100,000 b/d. World oil demand growth for
next year is forecast at 1.3m b/d, or 1.5 per cent.
As expected, developing countries will contrib-
ute the lion’s share of the oil demand growth for
2007. Expected oil demand growth in the OECD
countries will account for only 18 per cent of
the world total. China, with an extra 400,000
b/d, will lead world oil demand growth, while
the Middle East will see growth of 300,000 b/d.
World oil supply
Non-OPEC
Forecast for 2006
Non-OPEC oil supply is expected to average
51.2m b/d in 2006, representing an increase of
1.09m b/d over 2005, broadly unchanged from
the last assessment. On a quarterly basis, non-
OPEC supply is expected to average 51.2m b/d
and 52.4m b/d in the third and fourth quarters,
respectively. Preliminary data for the month of
July and August puts total non-OPEC supply at
around 50.9m b/d and 50.8m b/d, respectively,
representing year-on-year growth of 1.1m b/d
and 900,000 b/d.
OECD
OECD oil supply is expected to average
20.2m b/d, representing a drop of 130,000
b/d over the previous year. The outlook remains
unchanged, but historical revisions have been
made to the data of the US, Canada, Denmark
and Australia, which have impacted on the
absolute level of these countries. The outlook
for the US remains subject to positive revisions
now that the giant Prudhoe Bay field will come
back earlier than previously assumed. Total oil
production for the OECD countries in July and
August is estimated at 20m b/d and 19.7m
b/d, respectively.
US
Total US oil supply is expected to aver-
age 7.3m b/d in 2006. On a quarterly basis, it
is expected to average 7.4m b/d and 7.4m b/d
in the third and fourth quarters, respectively,
broadly in line with total oil supply of 7.4m
b/d in both July and August. The negative impact
of production losses at Prudhoe Bay during the
month of August was partially offset by the bet-
ter-than-expected performance of fields in the
lower 48 states and new field start-ups in the
Gulf of Mexico. Prudhoe Bay is now likely to
return to full production (400,000 b/d) by the
end of October, but there is still the assump-
tion that 200,000 b/d will remain shut until
year-end. Elsewhere, some 150,000–180,000
b/d of hurricane-related losses in the Gulf of
Mexico and onshore Louisiana are still out, of
which only 100,000 b/d is expected to come
back over the next few months.
Mexico and Canada
Mexican oil supply is expected to aver-
age 3.7–3.8m b/d in 2006. Total Mexican oil
supply remains just above 3.7m b/d and is not
expected to oscillate much below this range in
the next two years, despite growing consensus
that Pemex will be unable to compensate for
production losses at Cantarell. Government data
indicates that the giant Cantarell field produced
1.7m b/d in July, which is below expectations
for the year.
Canadian oil supply is expected to average
3.2m b/d in 2006, representing an increase of
200,000 b/d over 2005. The Terra Nova field
(120,000 b/d) is expected to return to full pro-
duction in November, and the new syncrude
upgrader (125,000 b/d), which was shut three
months ago for environmental reasons, is now
back onstream. These two units will help take
Canadian supply close to 3.4m b/d in the fourth
quarter of 2006, from 3.1m b/d in August.
Western Europe
Oil supply in the OECD European region
is expected to average 5.4m b/d in 2006.
Norwegian oil supply is expected to average
around 2.8m b/d in 2006. Preliminary data
for July and August shows that production was
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in September is expected to reduce supplies
by 300,000 b/d. UK oil supply is expected
to average 1.7m b/d. Preliminary data for July
and August indicates that UK oil supply aver-
aged 1.7m b/d and 1.4m b/d, respectively.
Looking ahead, maintenance is expected to
affect September output. Danish oil production
should average 350,000 b/d, around 20,000
b/d lower than in 2005. July data shows that
Danish output averaged 350,000 b/d in line
with forecasts.
Asia Pacific
Oil supply in the Asia Pacific region is
expected to average 540,000 b/d in 2006.
Australian oil supply is expected to average
470,000 b/d this year, a drop of 60,000 b/d
over 2005 and slightly lower than last month.
Australian oil production is still underperform-
ing, but is expected to recover before year-end.
Developing countries
Oil supply in the developing countries is
expected to average 13.1m b/d, an increase of
600,000 b/d over 2005. On a quarterly basis,
total oil supply is expected to average 13.2m b/d
and 13.6m b/d in the third and fourth quarters,
respectively. Total oil production for develop-
ing countries in July and August is estimated at
13m b/d and 13.1m b/d, respectively.
India’s oil production is forecast to average
800,000 b/d in 2006, which is just above last
year’s level. July and August production esti-
mates put total production at around 800,000
b/d. Recent reports indicate that the Bombay
High North Field still remains 20 per cent below
capacity, due to operational constraints, and
there have been problems connecting new
equipment to the platform. The field is produc-
ing around 90,000 b/d.
Papua New Guinea oil production was
affected in August by the closure of the load-
ing terminal in the Gulf, coupled with a lack of
storage capacity. The country’s total production
is estimated at 49,000 b/d and is expected to
be fully restored shortly.
Brazil’s oil supply appears to have remained
above 2.1m b/d in July and August. The country’s
oil production is expected to average 2.2m b/d
in 2006, representing an increase of 190,000
b/d over 2005. Strong output growth is expected
in the months ahead.
Peru’s oil production averaged a new record
in August. Total crude and condensate output
was 122,000 b/d, according to government data.
The current forecast for 2006 is an average of
120,000 b/d. Peru’s recent performance has
been affected by pipeline damage and other
technical problems, but these now appear to
have been solved.
The production forecast for Yemen is cur-
rently 410,000 b/d, representing an increase of
10,000 b/d over 2005. However, recent devel-
opments indicate that output may be averag-
ing slightly higher than currently estimated. A
large project in the East Shabwa Area (Block 10)
has performed better than expected and is now
producing close to 45,000 b/d, compared with
12,000 b/d in 2005. Further increases from this
project are expected in 2007 and may well con-
tribute to a larger rise in both 2006 and 2007
than that currently estimated.
FSU, other regions
FSU oil supply is expected to average 12m
b/d, an increase of 500,000 b/d versus 2005.
The forecast for other regions (China and other
Europe) remains unchanged with total oil supply
expected at 3.8m b/d in 2006, representing an
increase of 70,000 b/d over 2005. For the rest
of the year, total FSU oil supply is expected to
average 12.2m b/d and 12.3m b/d in the third
and fourth quarters, respectively.
Russia
Russian oil supply is expected to average
9.7m b/d in 2006, an increase of 220,000 b/d
versus 2005. The latest data shows that Russian
production averaged 9.68m b/d and 9.71m b/d
in July and August, respectively. Total oil supply
is expected to continue to rise until the start
of the winter, driven by new production from
Sakhalin-1. However, export tariffs are expected
to increase to a new record of $32.2/b which,
combined with recent price developments, is
likely to negatively affect some of the marginal
production in the next few months.
Caspian, China
The outlook for Azeri oil production remains
unchanged. It is expected to average 660,000
b/d in 2006, an increase of 210,000 b/d over
2005. Preliminary data for August puts total
Azeri oil production at around 630,000 b/d.
Kazak oil production is expected to average
1.3m b/d in 2006, an increase of 80,000 b/d
over last year. Data for the months of July and
August puts oil production at 1.36m b/d and
1.34m b/d, respectively. Kazak production
remains susceptible to maintenance at some
of the large fields, but, overall, it continues to
edge upwards. In Uzbekistan, recent data puts
total oil supply during July at 109,000 b/d, in
line with expectations, but representing a drop
of ten per cent year-on-year. The estimate for
China remains unchanged. Total oil supply is
expected to average 3.7m b/d, representing
an increase of 70,000 b/d over last year; July
and August data shows average production of
3.7m b/d.
Forecast for 2007
Non-OPEC oil supply is expected to aver-
age 53m b/d in 2007, representing an increase
of 1.8m b/d over 2006. On a quarterly basis,
total non-OPEC oil supply is expected to aver-
age 52.4m b/d, 52.6m b/d, 53m b/d and 53.9m
b/d in the first, second, third and fourth quar-
ters, respectively.
The FSU region is expected to see demand
grow by 500,000 b/d to 12.6m b/d. Caspian
countries are expected to be responsible
for more growth than Russia. Oil supply in
the African region is forecast to increase by
500,000 b/d to 4.6m b/d with most of the
increase expected to come from deepwater
Angola, Equatorial Guinea and onshore Sudan.
Oil supply in the North American region is
expected to grow 400,000 b/d to 14.8m b/d.
The increase will be driven by the unwinding of
losses in Alaska, additions in the Gulf of Mexico
deepwater and the expansion of Canadian oil
sands. Oil production in the Latin American
region is expected to grow by 100,000 b/d to
4.6m b/d. Regional growth will be driven by a
modest increase in Brazil.
Elsewhere, OECD Europe is expected to
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show a modest increase in demand to 5.5m b/d,
with a normal maintenance schedule assumed.
OECD Asia demand is expected to increase to
600,000 b/d. This assumes the partial return
of some of the production that has been
affected in Australia this year by cyclone
activity, and increased drilling in new fields
that have been underperforming. Oil supply in
other Asia and the Middle East is expected to
remain broadly flat at 2.8m b/d and 1.8m b/d,
respectively. Chinese oil production is forecast
to increase to 3.8m b/d, or by around 60,000
b/d, from 2006.
OPEC NGLs and non-conventional oils
In 2006, total OPEC output of NGLs and
non-conventional oils is expected to average
4.3m b/d, representing an increase of 200,000
b/d over the previous year. Similar growth is
expected in 2007 at around 250,000 b/d.
OPEC crude oil production
Total crude oil production averaged 29.79m
b/d in August, representing an increase of
90,000 b/d from July, according to secondary
sources. Iraq’s oil production stood at 2.05m b/d.
FSU net exports
In 2006, FSU net oil exports are expected
to average 8.3m b/d, an increase of 600,000
b/d over 2005. August crude exports were
5.8m b/d, unchanged from the previous month.
Including products, total net oil exports were 8m
b/d in August. In 2007, FSU net oil exports are
expected to rise to 8.8m b/d, or by 500,000 b/d,
from 2006, driven by new sources of crude from
the Caspian and Russian product exports.
Rig count
Non-OPEC
The non-OPEC rig count stood at 2,878 rigs
in August, which represents an increase of two
rigs compared to the previous month. Of the
total, 2,584 were operating onshore and the
rest offshore. In terms of the oil and gas split,
899 rigs were drilling for oil, while the remain-
der was drilling for gas.
OPEC
The OPEC rig count stood at 345 rigs in
August, representing an increase of 18 rigs over
the previous month. Gains took place in all coun-
tries except Algeria, the United Arab Emirates
(UAE), and Venezuela. Of the total, 274 rigs
were operating onshore and the rest offshore.
In terms of the oil and gas split, there were 281
oil rigs operating and the rest gas rigs.
Oil trade
OECD
Preliminary data shows that OECD crude
oil imports increased for the fifth consecutive
month to hit a 10-month high of 32.0m b/d
in August. This increase — corresponding to
around 100,000 b/d above both the previous
month and a year earlier — was driven essen-
tially by Japan and the US. Similarly, product
imports continued their upward trend, but at
a slower pace of 25,000 b/d, to hit 11.1m b/d,
their highest level since last October. The US
was the main contributor to the increase in
product imports.
On the export side, both crude oil and prod-
ucts fell marginally to average 7.3m b/d and
8.1m b/d, respectively, which corresponded to
15,000 b/d and 8,000 b/d below the previous
month. When compared with a year ago, crude
oil exports were down 625,000 b/d, whereas
product exports were about 200,000 b/d higher.
As a result, OECD net crude oil imports
averaged 24.8m b/d, up 109,000 b/d from the
previous month and 684,000 b/d more than a
year earlier. With net product imports showing
an increase of 33,000 b/d, total OECD net oil
imports hit 27.8m b/d, resulting in growth of
772,000 b/d, or three per cent, year-on-year.
No significant change took place in the
sources of imports. Saudi Arabia and the FSU
remained the largest suppliers of OECD crude
oil imports with around 16 per cent each, fol-
lowed by Norway and Mexico, each with less
than eight per cent. Nevertheless, when com-
pared with a year earlier, Saudi Arabia’s share
gained more than three per cent for the Kingdom
to overtake Russia as the main supplier.
However, OECD product imports contin-
ued to come from several countries, with the
Netherlands, the FSU and Venezuela the main
suppliers with around five per cent each.
US
US crude oil imports continued to increase,
averaging 10.4m b/d in August, a rise of 90,000
b/d over the previous month. Product imports
increased a further 35,000 b/d to nearly 3.8m
b/d. On a weekly basis, US crude oil imports
surged significantly during the week ending
August 25, gaining around 950,000 b/d to hit
over 11.15m b/d — the second highest level ever.
The West Coast was the main contributor to this
substantial jump, due to the shortage caused
by the partial outage of BP Prudhoe Bay output
in Alaska. West Coast imports rose 456,000
b/d to hit a record of nearly 1.7m b/d, with most
of the increase assumed to have been used to
build up stocks.
While crude oil imports were 100,000 b/d
above a year earlier, product imports showed
year-on-year growth of more than 400,000
b/d, resulting in an expansion of 500,000 b/d
in total oil imports.
For the first eight months of the year, crude
oil imports averaged 10.1m b/d, as against
10.2m b/d in the same period of 2005, corre-
sponding to a drop of around 100,000 b/d.
With crude oil exports stable at 21,000 b/d
and product exports falling 82,000 b/d to 11.2m
b/d, total US oil imports averaged 13.0m b/d,
OECD crude oil
imports increased for
the fifth consecutive
month to hit a ten-
month high of 32.0m
b/d in August.
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ew an increase of 1.6 per cent over the previous
month and five per cent higher than a year ago.
Canada remained the main supplier of US
crude oil imports with 19 per cent, followed
by Mexico and Saudi Arabia with 17 per cent
each. Compared with a year earlier, the shares
of Canada and Saudi Arabia remained stable,
while Mexico’s share dropped by three per cent.
Regarding products, Canada, the Virgin
Islands and Algeria continued to be the largest
suppliers to the US with 17 per cent, 12 per cent
and ten per cent of the total, respectively.
Japan
Japan’s crude oil imports rose a further
200,000 b/d to average 4.2m b/d in August
after refineries returned from their maintenance
programmes, boosting throughput. Within just
two months following the heavy maintenance,
Japan’s crude oil imports jumped by more than
750,000 b/d. In addition, the need to build
stocks, which had declined sharply during the
previous two months, also contributed to the
increase in imports. In contrast, product imports
continued to drop, losing almost 100,000 b/d
to average 550,000 b/d, the lowest level so far
this year. Compared with a year earlier, crude
oil imports were two per cent higher, whereas
product imports fell 36 per cent.
With product exports increasing 58,000
b/d, Japan’s total net oil imports averaged nearly
4.4m b/d, a gain of 40,000 b/d over the previ-
ous month, but about ten per cent lower than
a year ago.
Regarding deliveries, Saudi Arabia and the
UAE remained the main suppliers of Japan’s
crude oil with 32 per cent and 24 per cent,
respectively, as well as the largest suppliers of
products, with 14 per cent and ten per cent.
China
China’s crude oil and product imports fell
significantly in July, dropping 600,000 b/d
to average 3.6m b/d, the lowest level since
last November. Crude oil imports declined by
363,000 b/d, the highest fall so far this year, to
average 2.5m b/d, which corresponds to a loss
of 100,000 b/d from a year earlier. However,
product imports were 237,000 b/d lower, off-
setting the increase of the previous month to
stand at nearly 1.1m b/d. But when compared
with a year earlier, product imports in July were
270,000 b/d higher.
The strong decline in China’s crude oil
imports was due to the anticipated closure
of refineries for maintenance. The decline in
refined products offset the substantial rise of
the previous month and could reflect a slow-
down in demand, especially for heavy fuel oil
from farmers.
With a 25,000 b/d drop in total crude oil
and product exports, China’s net oil imports
showed a decline of 575,000 b/d in July over
the previous month, but when compared with
the same month last year, they displayed growth
of 380,000 b/d.
For the January-July period, China’s crude
oil imports averaged 2.9m b/d, almost 13 per
cent higher than a year earlier, while exports
averaged 330,000 b/d, a drop of 23 per cent
from a year ago.
On the product side, China’s crude oil
and product imports averaged 1.0m b/d and
120,000 b/d, respectively, for the same period.
Despite a two per cent loss in its share,
Angola remained the largest supplier of China’s
crude oil with 16 per cent, followed by Saudi
Arabia with 14 per cent and Russia with 13 per
cent. Compared with a year ago, imports from
Angola increased by 7.4 per cent, rising from
around 380,000 b/d to more than 400,000
b/d. Imports from Saudi Arabia lost 35 per cent,
decreasing from 540,000 b/d to 350,000 b/d.
Imports from Venezuela continued to
increase to reach 155,000 b/d in July, com-
pared with less than 30,000 b/d a year ear-
lier. The substantial jump in Venezuela’s share
of China’s crude oil imports came as a result
of agreements signed between the two coun-
tries in late 2005, which aimed at boosting
exports from Venezuela to 300,000 b/d within
one or two months. Furthermore, exports from
Venezuela to China are expected to increase
further and could reach up to 500,000 b/d by
2009 as mentioned by Venezuelan President
Hugo Chavez during his recent visit to China.
For the first seven months of the year,
Angolan and Russian shares of China’s imports
increased by 46 per cent and 38 per cent,
respectively, while Saudi Arabia’s share edged
up just 2.5 per cent. The biggest winner was
Venezuela, which saw its share jump by 190
per cent.
India
Preliminary data shows that India’s oil
imports saw some recovery in July. Crude oil
imports stood at nearly 2.2m b/d in July, an
increase of 64,000 b/d over the previous
month, while product imports reached 250,000
b/d, a rise of 14,000 b/d over June figures.
Total growth of 77,000 b/d corresponds to 50
per cent of the 155,000 b/d drop displayed the
previous month.
With product exports rising 44,000 b/d to
460,000 b/d, India’s total net oil imports aver-
aged almost 2.0m b/d, an increase of 131,000
b/d from a year earlier. Crude oil net imports
stood at 2.2m b/d, a gain of 282,000 b/d over
a year ago, while product exports averaged
200,000 b/d.
Stock movements
US
Total commercial oil stocks in the US ended
the month of August at 1,066.7m b, represent-
ing a build of 10.3m b, or 300,000 b/d. This
represented a cushion of 4.3 per cent and 7.2
per cent, respectively, against the year-ago level
and the five-year average. As in the previous
month, the build was entirely due to product
stock increases in all but gasoline as crude oil
inventories declined further in August, although
at a more moderate pace than in July.
Crude oil stocks lost 2.5m b to stand at
330.6m b in August, representing a consider-
able recovery compared with the 7.3m b draw
recorded the previous month. Thus, crude oil
inventories remained at comfortable levels of
six per cent and 12 per cent, respectively, above
a year ago and the five-year average. The trend
in crude oil stocks is partly attributed to an
increase in refinery input, which rose by 83,000
b/d to 15.8m b/d. Refinery runs inched up by 0.9
per cent to 92.6 per cent, lower than the 94.7
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per cent seen in the same month last year. Also
contributing to falling crude inventories was the
46,000m b/d drop in production to 5.1m b/d,
which put the level one per cent below the same
month last year. Following the shutdown of
part of the Prudhoe Bay oil field, larger imports
partly counterbalanced the downward impact
of the situation. Imports increased by 90,000
b/d to 10.41m b/d. In terms of forward cover,
crude oil inventories remained at 21.2 days, a
healthy five per cent and 11 per cent cushion,
respectively, against the year-ago level and the
five-year average.
US gasoline stocks saw a seasonal decline
of 3.0m b to 206.9m b in August, similar to the
draw seen the previous month. Nonetheless,
gasoline inventories remained at healthy levels,
gaining 6.6 per cent and 4.2 per cent, respec-
tively, over a year ago and the five-year aver-
age. With the end of the driving season and the
shift towards distillates, as well as dwindling
fears about this year’s hurricane season, it sug-
gested there was little reason for concern about
gasoline supplies in the US. Thus, the rate of
gasoline stock depletion was lower compared
with a year ago and 2004.
Forward cover stood at 21.6 days, a gain of
six per cent above the year-ago level, but only
one per cent higher than the five-year aver-
age and less than the level reported in 2004.
The recovery in gasoline inventories was due
to greater gasoline imports, which rose by
9.8 per cent to 1.2m b/d (EIA four-week aver-
age) in August as a result of a 156,000 b/d
increase in blending components, which off-
set a 47,000 b/d fall in conventional gasoline.
The import of blending components led to a
modest one per cent expansion in production
(EIA four-week average) on a monthly basis in
August, compared with a contraction in July.
This was due to the recovery in refin-
ery runs supported by the attractive crack
spread, which lasted until the end of August.
However, crack spreads collapsed to $10/b on
both sides of the Atlantic following the recov-
ery in US supply after several outages and
the end of the driving season. Finally, a drop
in domestic gasoline demand by 18,000 b/d
to 9.6m b/d took place, but demand was still
140,000 b/d higher than the year-ago level
in August and 250,000 b/d more than in the
same week in 2004 (EIA four-week average).
This indicates that the somewhat bearish
trend in the gasoline market is not associated
to stagnating demand, but to other factors, such
as the mild hurricane season and the end of the
US driving season. The relatively high domes-
tic gasoline demand also explains the low lev-
els of gasoline inventories in terms of forward
cover. Stock-builds ahead of the high demand
for the winter heating season resulted in mid-
dle distillate inventories rising further by 7.4m
b to 139.9m b on a monthly basis, 7.7 per cent
above the five-year average and slightly above
the year-ago level. The forward cover for dis-
tillate stocks stood at 34.1 days, two per cent
and three per cent higher, respectively, than a
year ago and the five-year average. Improved
distillate margins led refiners to maximize dis-
tillate production.
Contrary to the trend in July, the stock-build
relied mainly on diesel, which rose by 4.5m b
to 80.67m b in August. This left diesel inven-
tories with a cushion of two per cent and eight
per cent, respectively, against the year-ago fig-
ure and the five-year average. An 11.8m b build
in ULSD more than offset a 7.3m b decline in
stocks of regular diesel fuel (15 ppm to 500
ppm sulphur). Despite growing demand, die-
sel inventories managed to increase, owing to
higher imports, which grew by 14 per cent to
265,000 b/d in August over the previous month
(EIA four-week average). ULSD imports rose
seven per cent to stand at 175,000 b/d over
the previous month, while regular diesel fuel
imports expanded by 29 per cent to 90,000
b/d (EIA four-week average). Concerning pro-
duction, diesel increased by 100,000 b/d to
3.3m b/d, compared with the previous month,
but ULSD output grew by nine per cent and
regular diesel fuel dropped by six per cent.
High-sulphur distillate fuel, or heating oil
inventories, rose 2.9m b to 59.3m b in August
from the previous month, which looked healthy
compared with the year-ago level and the five-
year average. These stocks are expected to rise
in the coming weeks in preparation for the win-
ter season.
In the week ending September 8, total com-
mercial oil inventories in the US increased by
4.4m b to reach 1,071.1m b, seven per cent
and eight per cent above the year ago and the
five-year average, respectively. Crude oil stocks
recorded a drop of 2.9m b, which left the level
at 327.72m b, due to a reduction in refinery
runs of 0.5 per cent to 93 per cent from the
previous week. Nevertheless, crude oil stocks
looked comfortable at six per cent and 12 per
cent above the year-ago figure and the five-
year average, respectively. Gasoline stocks rose
for the fourth week — by 110,000 barrels — to
stand at 207m b, in line with market forecasts
and following a slight weakening of domestic
demand, due to the end of the driving season.
In volume terms, gasoline stocks gained 7.8 per
cent per cent from a year ago and five per cent
against the five-year average.
In terms of forward demand cover, gaso-
line inventories stood at 21.7 days, three per
cent higher than a year ago and on a par with
the five-year average. The gasoline stock-build
is related to a slowdown in demand, which fell
by 250,000 b/d in the week ending September
8, amid high imports, which stood 30 per cent
above the five-year average. Middle distillate
inventories grew a further 4.6m b to 144.6m
b, standing at very healthy levels compared
with the year-ago level and the five-year aver-
age. Diesel accounted for nearly 70 per cent
of the middle distillate stockbuild, rising by
3.2m b to 83.9m b week-on-week. This repre-
sented 11 per cent and 13 per cent cushions,
respectively, on the year-ago level and the
In terms of forward
demand cover,
gasoline inventories
stood at 21.7 days,
three per cent higher
than a year ago.
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ew five-year average. Greater diesel output, which
grew to 3.4m b/d, explained the stockbuild,
despite a week-on-week decline in imports.
Western Europe
Total commercial oil stocks in Eur-16 (Eu-15
plus Norway) were 8.4m b lower at the end of
August, compared with the previous month. This
left inventories on a par with the year-ago level,
but represented a six per cent cushion on the
five-year average. The draw came on the back
of middle distillate inventories and crude oil.
The crude oil stock surplus in July reversed
into a 3.5m b draw in August, prompted by
higher refinery runs, which rose by 200,000
b/d, compared with July, and boosted the oper-
able utilization rate to 94 per cent, although
refinery throughputs were lower than in August
2003, owing to unplanned maintenance shut-
downs in Mediterranean plants. Total product
stocks experienced the sharpest draw, falling
by 7.4m b to 624.7m b in August, compared
with the previous month, which left them about
two per cent lower than a year ago, but two
per cent above the five-year average. In line
with seasonal patterns, gasoline inventories
declined by 100,000 b to 132.1m b, as a result
of considerable exports to the US at the begin-
ning of August with inventories losing 4.2m b,
compared with the year-ago level and 4.0m b
against the five-year average.
Contrary to the seasonal pattern, and after
enjoying a surplus for two months, middle distil-
late inventories declined by 4.3m b to 382.4m
b in August from the previous month. The draw,
which was due to growing diesel demand and
lower gasoil imports from Russia, amid brisk
domestic demand and low refinery runs at
Lithuania’s Mazeikiai refinery, left stocks 5.6m
b below a year earlier, but 18.8m b above the
five-year average.
Residual fuel oil stocks fell further — by
2.1m b to 110.2m b in August from the previ-
ous month, as a result of high temperatures in
Southern Europe in the first half of the month,
which boosted demand for low-sulphur fuel oil
used by air conditioning units. By contrast, an
oversupply of high-sulphur grades was reported
in August with the closing of the arbitrage win-
dow to Asia-Pacific due to record-high stock
levels in Singapore.
Japan
Total commercial oil inventories in Japan
were up 1.0m b to stand at 183.9m b in July,
but remained below the year-ago level and the
five-year average. This build was the result of
the continuing upward trend in middle distillate
stocks and a recovery in crude oil inventories.
A deficit in crude oil inventories of only
800,000 b took place in July, compared with
6.7m b the previous month. Nevertheless, the
level of 116.4m b remained three per cent and
1.4 per cent below the year-ago level and the
five-year average, respectively. A robust expan-
sion in crude imports, which grew by 19.8 per
cent to stand at 4.2m b/d, explained the out-
come, despite an increase in refinery runs.
Imports were boosted by an astounding 164
per cent increase in crude coming from Iran in
July, but still remained two per cent below the
level seen in the same period last year.
On the product side, stocks continued to
build moderately, edging up 1.9m b to 67.5m b
in July, compared with the previous month, but
the cushions of 1.6 per cent and 0.7 per cent,
respectively, against the year-ago level and the
five-year average were less comfortable than
in June. The lower imports — which fell by 3.5
per cent on a monthly basis — together with a
continuing expansion in domestic sales, did
not lead to a draw on inventories as produc-
tion increased by around 11 per cent from last
month, while export growth remained the same.
Domestic sales were 0.7 per cent lower than in
the same month last year, as a result of unu-
sually low demand for gasoline for this year’s
summer driving season, owing to high oil prices.
Gasoline demand usually peaks in the June to
August period and although demand went up
by 10.1 per cent from June, this was only 1.4 per
cent higher than in July 2005. A sharp drop in
demand for jet fuel of around six per cent took
place in June when a 19.2 per cent increase
occurred, while gasoil, Fuel Oil A, paraffin wax
and asphalt domestic sales also slowed. Export
growth of products remained almost the same,
contributing to an improvement in the build in
product stocks. Compared with the previous
month, gasoline stocks declined a steeper 1.6
per cent to 12.1m b in June, which left them at
eight per cent and 8.5 per cent, respectively,
below the year-ago level and the five-year aver-
age. As in the previous month, a hefty decline
of 31.8 per cent in gasoline imports explained
this draw. Likewise, a ten per cent increase in
domestic sales and exports from the previous
month also contributed to this outcome, regard-
less of the 10.6 per cent increase in production.
Concerning middle distillates, the stock surplus
that was registered in June doubled, rising by
4m b to stand at 35.6m b in July, 8.5 per cent
higher than at the same time last year and 3.6
per cent above the five-year average. Kerosene
stocks rose 23.8 per cent in July from the previ-
ous month to stand 17.4 per cent above the year-
ago level, contributing to most of the build in
middle distillate stocks. This development was
due to a 33 per cent increase in production and
a more moderate drop in imports, compared
with the previous month and in order to avoid
last year’s experience when an insufficient stock
level in the high season prompted a price rise.
Balance of supply/demand
Estimate for 2006
Estimated demand for OPEC crude in 2006
is expected to average 28.9m b/d. On a quarterly
basis, the new forecast shows that demand for
OPEC crude is expected at 29.9m b/d, 28.3m
b/d, 28.7m b/d and 29m b/d in the first, second,
third and fourth quarters. Estimated demand
for OPEC oil has been reduced due to lower
expectations for demand growth.
Forecast for 2007
Estimated demand for OPEC crude in 2007
is expected to average 28.1m b/d, representing a
decline of 800,000 b/d over 2006. The forecast
shows that demand for OPEC crude is expected
at 29.2m b/d, 27m b/d, 28m b/d and 28.4m b/d
in the first, second, third and fourth quarters.
The expected decline remains unchanged, but
the absolute level for the required crude is
expected to be slightly lower.
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Table E: World crude oil demand/supply balance m b/d
1. Secondary sources. Note: Totals may not add up due to independent rounding.2. Stock change and miscellaneous.
Table E above, prepared by the Secretariat’s En er gy Stud ies Department, shows OPEC’s cur rent fore cast of world sup ply and de mand
for oil and natural gas liquids.
The month ly ev o lu tion of spot prices for se lected OPEC and non-OPEC crudes is pre sented in Tables One and Two on page 102,
while Graphs One and Two (on page 103) show the ev o lu tion on a weekly basis. Tables Three to Eight, and the corresponding
graphs on pages 104–105, show the ev o lu tion of monthly average spot prices for important prod ucts in six major markets. (Data
for Tables 1–8 is provided by courtesy of Platt’s Energy Services).
World demand 2002 2003 2004 2005 1Q06 2Q06 3Q06 4Q06 2006 1Q07 2Q07 3Q07 4Q07 2007
OECD 47.9 48.6 49.3 49.5 50.1 48.0 49.4 50.5 49.5 50.5 48.1 49.6 50.8 49.8
North America 24.1 24.5 25.4 25.5 25.1 25.1 25.7 25.9 25.5 25.5 25.2 25.9 26.1 25.7
Western Europe 15.3 15.4 15.5 15.5 15.7 15.0 15.6 15.7 15.5 15.6 15.1 15.6 15.8 15.5
Pacific 8.5 8.6 8.5 8.6 9.3 7.9 8.1 8.9 8.5 9.4 7.8 8.1 8.9 8.6
Developing countries 20.3 20.6 21.7 22.5 22.8 23.2 23.2 23.2 23.1 23.3 23.7 23.9 23.8 23.7
FSU 3.7 3.8 3.8 3.8 3.7 3.6 3.8 4.0 3.8 3.8 3.5 3.8 4.1 3.8
Other Europe 0.8 0.8 0.9 0.9 1.0 0.9 0.9 0.9 0.9 1.0 0.9 0.9 0.9 0.9
China 5.0 5.6 6.5 6.5 7.1 7.3 6.8 7.1 7.1 7.4 7.8 7.3 7.5 7.5
(a) Total world demand 77.8 79.4 82.3 83.2 84.7 83.0 84.2 85.6 84.4 86.0 84.0 85.5 87.1 85.7
Non-OPEC supply
OECD 21.9 21.7 21.3 20.3 20.3 19.9 20.0 20.7 20.2 20.7 20.7 20.7 21.1 20.8
North America 14.5 14.6 14.6 14.1 14.2 14.2 14.3 14.5 14.3 14.6 14.7 14.8 15.0 14.8
Western Europe 6.6 6.4 6.2 5.7 5.6 5.2 5.1 5.5 5.4 5.5 5.5 5.3 5.6 5.5
Pacific 0.8 0.7 0.6 0.6 0.5 0.5 0.5 0.6 0.5 0.6 0.6 0.6 0.6 0.6
Developing countries 11.5 11.6 12.0 12.5 12.9 12.8 13.2 13.6 13.1 13.6 13.6 13.8 14.1 13.8
FSU 9.3 10.3 11.1 11.5 11.7 12.0 12.2 12.3 12.1 12.3 12.5 12.7 12.9 12.6
Other Europe 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
China 3.4 3.4 3.5 3.6 3.7 3.7 3.7 3.7 3.7 3.8 3.7 3.8 3.8 3.8
Processing gains 1.7 1.8 1.8 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Total non-OPEC supply 48.0 48.9 49.9 50.1 50.6 50.5 51.2 52.4 51.2 52.4 52.6 53.0 54.0 53.0
OPEC ngls and non-conventionals 3.6 3.7 4.0 4.1 4.2 4.2 4.3 4.4 4.3 4.4 4.5 4.6 4.7 4.5
(b) Total non-OPEC supply
and OPEC NGLS51.6 52.6 53.9 54.2 54.8 54.7 55.5 56.8 55.4 56.8 57.1 57.6 58.7 57.5
OPEC crude supply and balance
OPEC crude oil production1 25.4 26.9 29.0 29.9 29.7 29.6
Total supply 77.0 79.6 82.9 84.0 84.5 84.3
Balance2 –0.8 0.2 0.7 0.8 –0.2 1.2
Stocks
OECD closing stock level m b
Commercial 2478 2517 2550 2594 2597 2646
SPR 1347 1411 1450 1487 1487 1493
Total 3825 3928 4000 4081 4084 4139
Oil-on-water 816 883 906 960 963 967
Days of forward consumption in OECD
Commercial onland stocks 51 51 51 52 54 54
SPR 28 29 29 30 31 30
Total 79 80 81 82 85 84
Memo items
FSU net exports 5.6 6.5 7.3 7.7 8.0 8.4 8.4 8.3 8.3 8.5 9.0 8.9 8.7 8.8
[(a) — (b)] 26.1 26.7 28.4 29.1 29.9 28.3 28.7 28.9 28.9 29.2 27.0 28.0 28.4 28.1
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Note: As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16, 2005 (ie 3W June), the OPEC Reference Basket has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference.1. Tia Juana Light spot price = (TJL netback/Isthmus netback) x Isthmus spot price.Brent for dated cargoes; Urals cif Mediterranean. All others fob loading port.Sources: The netback values for TJL price calculations are taken from RVM; Platt’s; Reuters; Secretariat’s assessments.
Table 2: Selected OPEC and non-OPEC spot crude oil prices, 2005–2006 $/b
2005 2006 Weeks 31–35 (week ending)
Crude/Member Country Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Aug 4 Aug 11 Aug 18 Aug 25 Sep 1
Arab Light — Saudi Arabia 58.24 57.63 54.65 51.55 52.84 58.43 56.56 57.54 63.85 64.83 65.03 69.06 68.76 70.08 71.42 68.10 67.79 65.72
Basrah Light — Iraq 57.10 55.68 51.39 48.07 49.15 55.59 52.32 54.01 61.18 62.32 62.38 66.49 65.42 67.86 68.62 64.45 63.85 61.93
BCF-17 — Venezuela 46.15 50.79 47.51 41.33 42.34 47.90 45.90 49.52 56.01 56.62 55.01 58.72 60.29 62.03 63.45 59.85 58.51 56.62
Bonny Light — Nigeria 65.49 65.60 60.74 57.18 57.91 64.04 62.12 63.80 71.80 71.75 70.22 75.49 75.29 78.12 79.32 74.00 73.82 70.34
Es Sider — SP Libyan AJ 60.27 60.39 58.25 54.92 57.14 61.77 59.12 60.22 67.03 67.25 66.62 71.42 70.72 72.68 73.80 69.92 69.86 66.66
Iran Heavy — IR Iran 55.69 55.10 51.73 49.28 50.88 57.10 55.43 56.56 63.09 63.27 62.24 66.59 66.42 67.62 69.15 65.88 65.42 63.26
Kuwait Export — Kuwait 55.18 54.60 51.76 49.19 50.83 56.52 55.01 55.80 62.20 62.80 62.37 66.35 66.02 67.11 68.60 65.53 65.06 63.05
Marine — Qatar 57.49 58.37 55.80 53.17 54.72 59.85 59.06 59.39 65.62 66.29 66.16 70.21 70.05 70.90 72.56 69.73 69.05 67.22
Minas — Indonesia 61.07 60.27 58.64 53.87 54.43 63.35 61.35 62.30 69.17 70.47 68.49 74.13 75.42 76.92 78.96 74.68 73.93 71.26
Murban — UAE 61.78 62.68 59.30 56.13 57.47 62.72 61.77 62.33 68.46 69.84 69.66 73.70 73.66 74.36 76.04 73.26 72.77 71.02
Saharan Blend — Algeria 63.67 63.30 59.48 56.15 57.65 64.06 61.59 62.98 70.21 70.31 69.15 74.37 74.50 77.07 78.35 73.60 73.08 69.50
OPEC Reference Basket 57.82 57.88 54.63 51.29 52.65 58.48 56.62 57.87 64.44 65.11 64.60 68.89 68.81 70.35 71.72 68.13 67.67 65.39
Table 1: OPEC Reference Basket crude oil prices, 2005–2006 $/b
2005 2006 Weeks 31–35 (week ending)
Crude/Country Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Aug 4 Aug 11 Aug 18 Aug 25 Sep 1
Arab Heavy — Saudi Arabia 52.02 51.57 49.03 47.40 49.16 54.91 53.52 54.08 60.74 60.88 59.84 63.74 63.57 64.40 66.08 63.24 62.62 60.72
Brent — North Sea 64.06 62.75 58.75 55.41 57.02 63.05 60.12 62.08 70.35 69.83 68.69 73.66 73.11 76.35 77.30 72.21 71.47 67.39
Dubai — UAE 56.55 56.41 54.20 51.63 53.22 58.56 57.61 57.82 64.14 65.07 65.22 69.17 68.92 69.77 71.43 68.59 67.97 66.02
Ekofisk — North Sea 63.92 62.55 59.22 55.76 57.54 63.34 60.36 62.53 70.32 69.88 68.45 73.74 73.09 75.79 77.01 72.45 71.39 68.09
Iran Light — IR Iran 60.41 58.74 54.38 51.31 53.20 58.99 57.00 58.77 65.14 64.67 64.30 68.81 68.49 70.37 71.80 67.53 67.47 64.51
Isthmus — Mexico 59.66 59.92 55.64 51.57 52.77 58.54 53.87 56.85 64.51 64.82 63.88 68.30 67.47 70.44 71.04 66.45 65.50 63.33
Oman –Oman 57.46 58.24 55.52 52.78 54.21 59.35 58.61 59.19 65.54 66.39 66.17 70.22 70.12 70.93 72.63 69.80 69.16 67.29
Suez Mix — Egypt 56.01 55.91 52.83 49.29 51.59 56.92 54.54 55.54 62.43 62.46 61.95 66.51 65.78 68.18 69.20 64.89 64.44 61.65
Tia Juana Light1 — Venez. 54.22 53.87 51.48 48.77 49.23 54.27 50.97 52.32 58.77 58.66 56.98 60.93 60.99 63.51 64.22 60.07 59.21 57.10
Urals — Russia 58.64 58.23 55.80 52.38 54.63 59.58 57.06 58.11 64.95 65.09 64.51 69.20 68.49 70.65 71.72 67.65 67.41 64.40
WTI — North America 64.96 65.28 62.67 58.42 59.36 65.39 61.49 62.82 69.46 70.89 70.88 74.33 73.01 75.12 75.63 71.79 72.07 69.94
103
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Note: As of January 2006, monthly averages are based on daily quotations (as approved by the 105th Meeting of the Economic Commission Board). As of June 16, 2005 (ie 3W June), the OPEC Reference Basket has been calculated according to the new methodology as agreed by the 136th (Extraordinary) Meeting of the Conference.
45
50
55
60
65
70
75
80
1 Sep12 19 265 May 2 Jun
OPEC Basket
Murban
Marine
Es Sider
BCF-17
Basrah Light
Arab Light
Bonny Light
Kuwait Export
Iran Heavy
Minas
Saharan Blend
Week 18 19 20 21 22 23 24 25 26 27 28 29 30
9 16 23 30 11 18 2514 21 28 4 Aug7 Jul
31 32 33 34 35
55
60
65
70
75
80
85
35343332313029 2827262524 23
OPEC Basket
Urals
West Texas
Isthmus
Ekofisk
Brent
Suex Mix
Oman
Week 18 19 20 21 22
1 Sep12 19 265 May 2 Jun 9 16 23 30 11 18 2514 21 28 4 Aug7 Jul
Graph 1: Evolution of the OPEC Reference Basket crudes, May to August 2006 $/b
Graph 2: Evolution of spot prices for se lect ed non-OPEC crudes, May to August 2006 $/b
104
naphtha
regular gasoline unleaded
premium gasoline 50ppm
dieselultra light jet kero
fuel oil1%S
fuel oil3.5%S
2005 August 69.12 75.37 84.28 80.15 79.78 41.70 39.25
September 74.77 82.32 92.35 83.28 83.78 46.70 41.86
October 71.56 68.81 77.64 81.54 81.27 46.94 39.98
November 62.65 59.58 67.03 71.05 69.50 42.01 37.50
December 65.20 60.82 68.24 69.25 70.00 41.75 37.54
2006 January 73.50 67.85 76.37 73.79 76.16 45.19 42.21
February 68.79 62.43 70.12 72.76 74.31 47.04 44.03
March 69.12 68.03 76.53 77.42 76.52 45.37 44.02
April 77.49 80.84 90.97 84.69 84.70 47.77 47.67
May 78.73 83.24 93.84 86.03 87.00 47.14 48.13
June 80.63 84.91 95.72 86.13 87.06 44.65 44.60
July 84.43 91.03 102.17 87.80 89.69 46.10 46.79
August 81.35 82.74 93.21 89.75 91.68 46.38 46.41
naphtha
premium gasoline50ppm
diesel ultra light
fuel oil1%S
fuel oil3.5%S
2005 August 58.32 83.45 80.97 43.55 37.73
September 62.01 88.35 84.73 48.43 41.43
October 58.43 75.86 81.66 45.39 39.15
November 51.20 64.69 69.80 41.91 35.57
December 53.71 67.95 70.64 43.53 35.02
2006 January 59.23 75.71 74.58 47.98 39.62
February 56.42 68.48 74.41 51.10 42.56
March 57.70 77.70 77.59 47.73 43.29
April 64.78 90.10 84.93 47.66 46.28
May 65.85 94.46 87.09 48.89 46.44
June 67.45 95.00 85.85 46.95 44.47
July 70.21 102.69 88.92 49.59 46.80
August 67.81 93.24 89.83 49.86 44.99
regular gasoline
unleaded 87
regular gasoline unl 87rfg gasoil jet kero
fuel oil0.3%S
fuel oil2.2%S
2005 August 79.97 83.13 77.86 79.41 58.94 39.44
September 89.92 93.13 85.92 90.26 65.40 44.29
October 71.63 72.41 85.13 88.48 64.45 45.28
November 61.67 61.14 72.03 71.47 56.36 39.73
December 66.97 65.79 72.08 73.56 58.75 41.93
2006 January 72.61 71.85 74.01 77.00 55.77 44.99
February 62.95 62.25 73.36 73.15 53.47 47.17
March 73.97 74.67 78.53 79.97 54.13 46.78
April 88.59 90.25 88.32 87.84 57.04 48.80
May 86.03 90.23 89.57 88.63 56.44 48.72
June 86.79 89.54 88.62 86.56 55.98 47.60
July 94.07 na 91.74 91.74 59.09 48.67
August 85.35 na 92.66 90.87 61.91 49.98
na not available.Source: Platts. Prices are average of available days.
Table and Graph 5: US East Coast market — spot cargoes, New York $/b, duties and fees included
Table and Graph 3: North European market — spot barges, fob Rotterdam $/b
Table and Graph 4: South European mar ket — spot cargoes, fob Italy $/b
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 3.5%Sfuel oil 1%S
jet kerodiesel
prem 50ppmreg unl 87
naphtha
2005 2006
2005 2006
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 3.5%S
fuel oil 1.0%S
diesel
prem 50ppm
naphtha
20052005 20062006
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 2.2%Sfuel oil 0.3%S LP
jet kerogasoilreg unl 87
reg unl 87 rfg
105
naphtha gasoil jet kerofuel oil
2%Sfuel oil2.8%S
2005 August 74.08 76.21 79.54 35.44 33.76
September 83.80 86.35 94.80 40.29 39.47
October 65.85 87.54 101.92 41.28 39.37
November 58.23 70.47 71.86 35.73 37.15
December 62.83 71.27 73.56 37.93 37.15
2006 January 73.77 73.77 77.25 40.99 40.34
February 60.19 69.56 74.65 43.17 42.44
March 71.08 74.98 79.53 42.78 42.56
April 79.53 83.72 88.06 44.80 44.72
May 72.61 83.50 87.84 44.72 44.65
June 78.88 81.20 88.22 43.60 43.37
July 82.38 82.39 91.23 44.67 44.55
August 71.17 85.12 90.20 46.00 45.51
naphtha
premium gasoline unl 95
premium gasoline unl 92
dieselultra light jet kero
fuel oil180 Cst
fuel oil380 Cst
2005 August 58.17 73.19 72.52 74.92 75.84 42.39 41.35
September 61.73 79.40 78.39 80.77 79.16 47.35 46.68
October 57.80 69.10 67.91 77.28 75.71 45.42 45.78
November 53.19 60.87 59.48 66.50 70.37 43.80 42.91
December 53.77 61.01 59.89 69.10 70.37 43.68 42.48
2006 January 58.26 66.78 65.42 77.61 77.02 46.72 45.33
February 56.65 65.02 64.20 79.36 74.96 49.18 47.95
March 59.82 69.64 69.05 82.11 75.66 49.43 48.89
April 64.45 81.13 80.15 90.68 84.77 51.81 51.32
May 65.59 86.80 86.17 92.78 85.55 52.02 51.32
June 68.06 82.76 82.21 89.13 86.18 49.68 48.46
July 70.55 85.50 84.47 88.17 87.57 52.28 50.72
August 66.59 81.22 80.36 88.19 89.47 50.16 47.61
naphtha gasoil jet kerofuel oil180 Cst
2005 August 60.39 68.09 73.42 40.05
September 65.28 71.78 75.70 44.71
October 62.50 67.97 71.33 42.41
November 54.78 57.69 60.91 39.00
December 56.99 60.23 66.97 37.57
2006 January 64.19 64.95 72.85 40.82
February 60.10 63.33 72.36 45.01
March 60.39 70.17 73.73 46.93
April 67.65 80.97 82.86 49.03
May 68.72 81.18 82.71 48.87
June 70.37 82.91 83.38 45.71
July 73.66 83.57 85.02 47.60
August 70.99 82.72 86.11 44.79
na not available.Source: Platts. Prices are average of available days.
Table and Graph 6: Caribbean market — spot cargoes, fob $/b
Table and Graph 7: Singapore market — spot cargoes, fob $/b
Table and Graph 8: Middle East Gulf market — spot cargoes, fob $/b
20052005 20062006
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 2.0%S
fuel oil 2.8%S
gasoil
jet keronaphtha
20052005 20062006
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 380 Cstfuel oil 180 Cst
jet kerodiesel
prem unl 92prem unl 95
naphtha
2005 2006
25
35
45
55
65
75
85
95
105
AugJulJunMayAprMarFebJanDecNovOctSepAug
fuel oil 180 Cstjet keronaphtha gasoil
Key themes include
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CGES 10th Annual Symposium, October 30–31, 2006, Bagshot, UK. Details: Centre for Global Energy Studies, 17 Knightsbridge, London SW1X 7LY, UK. Tel: +44 207 235 4334; fax: +44 207 235 4338/5038; e-mail: marketing@cges.co.uk; web site: www.cges.co.uk. Chad international oil and gas exhibition and conference, October 30–31, 2006, N’Djamena, Republic of Chad. Details: ITE Group Plc, 105 Salusbury Road, London, NW6 6RG, UK. Tel: +44 207 596 5269; fax: +44 207 596 5106; e-mail: Julia.romanenko@ite-exhibitions.com; web site: www.ite-exhibitions.com/og. 11th Condensate and naphtha forum, October 30–31, 2006; Petrochemical feedstocks: issues and alternatives, November 1–2, 2006, Phuket, Thailand. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02 The Octagon, 069534, Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: info@cconnection.org; web site: www.cconnection.org. Natural gas market fundamentals, November 2–3, 2006, Vancouver, Canada. Details: Canadian Energy Research Institute (CERI), #150, 3512–33 Street NW, Calgary T2L 2A6, Canada. Tel: +1 403 282 1231; fax: +1 403 284 4181; email: staple@ceri.ca; web site: www.ceri.ca. Oil and gas finance for non-financial managers, November 6–10, 2006, London, UK. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. LNG supplies for Asian markets, November 6–8, 2006, Singapore. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02 The Octagon, 069534, Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: info@cconnection.org; web site: www.cconnection.org. Korean oil and gas conference 2006, November 6–8, 2006, Seoul, Korea. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02 The Octagon, 069534, Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: info@cconnection.org; web site: www.cconnection.org. IADC International well control conference and exhibition, November 7–8, 2006, Abu Dhabi, UAE. Details: International Association of Drilling Contractors, PO Box 500733, Knowledge Village, Block 2B, Office G23, Dubai, UAE. Tel: +971 4 390 2750; fax: +971 4 366 4648; e-mail: info@iadc.org; web site: www.iadc.org. Jeddah water and power forum 2006, November 11–13, 2006, Jeddah, Saudi Arabia. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. Canada’s oil sands industry, November 13–14, 2006, Fort McMurray, Canada. Details: Canadian Energy Research Institute (CERI), #150, 3512–33 Street NW, Calgary T2L 2A6, Canada. Tel: +1 403 282 1231; fax: +1 403 284 4181; email: staple@ceri.ca; web site: www.ceri.ca. Electric industry fundamentals, November 13–14, 2006, Toronto, Canada. Details: Canadian Energy Research Institute (CERI), #150, 3512–33 Street NW, Calgary T2L 2A6, Canada. Tel: +1 403 282 1231; fax: +1 403 284 4181; email: staple@ceri.ca; web site: www.ceri.ca. Oil and gas exchange 2006, November 13–14, 2006, London, UK. Details: IQPC Ltd, Anchor House, 15–19 Britten Street, London SW3 3QL, UK. Tel: +44 207 368 9300; fax: +44 207 368 9301; e-mail: enquire@iqpc.co.uk; web site: www.iqpc.co.uk. Negotiating upstream oil and gas contracts, November 13–17, 2006, London, UK. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com.
LNG and gas contracts and project financing, November 13–17, 2006, Singapore. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. Oil and sustainable development, November 14–15, 2006, London, UK. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. The energy markets: evaluating trends and risks, November 14–17, 2006, London, UK. Details: The Petroleum Economist Ltd, 69 Carter Lane, London EC4V 5EQ, UK. Tel: +44 207 779 8840; fax: 44 207 779 8899; e-mail: training@petro-leum-economist.com; web site: www.petroleum-economist.com. FPSO Masterclass 2006, November 15–17, 2006, Perth, Australia. Details: IBC Energy Conferences, 69–77 Paul Street, London, EC2A 4LQ, UK. Tel: +44 207 017 5518; fax: +44 207 017 4745; e-mail: lindsay.ambrose@informa.com; web site: www.ibcenergy.com. Introduction to the upstream petroleum industry, November 16–17, 2006, Calgary, Canada. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. Introduction to the Canadian downstream petroleum industry, November 16–17, 2006, Calgary, Canada. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. Saudi energy forum 2006, November 18–20, 2006, Dammam, Saudi Arabia. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com. 12th Annual energy conference, November 19–21, 2006, Abu Dhabi, UAE. Details: The Emirates Centre for Strategic Studies and Research (ECSSR), Conference Department, PO Box 4567, Abu Dhabi, UAE. Tel: +971 2 404 4421; fax: +971 2 404 4422; e-mail: conferences@ecssr.ae; web site: www.ecssr.ae. Economic of downstream oil, November 20–22, 2006, Singapore. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02 The Octagon, 069534, Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: info@cconnection.org; web site: www.cconnection.org. Measuring and managing upstream oil and gas performance, November 20–22, 2006, London, UK. Details: The Petroleum Economist Ltd, 69 Carter Lane, London EC4V 5EQ, UK. Tel: +44 207 779 8840; fax: 44 207 779 8899; e-mail: training@petroleum-economist.com; web site: www.petroleum-econo-mist.com. World oil and gas strategy and economics, November 20–24, 2006, London, UK. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwc-group.com; web site: www.thecwcgroup.com. Economics and refining and oil quality, November 23–24, 2006, Singapore. Details: Conference Connection Administrators Pte Ltd, 105 Cecil Street #07–02 The Octagon, 069534, Singapore. Tel: +65 6222 0230; fax: +65 6222 0121; e-mail: info@cconnection.org; web site: www.cconnection.org. Future fuels 2006, November 27–29, 2006, Washington DC, USA. Details: CWC Associates Ltd, 3 Tyers Gate, London SE1 3HX, UK. Tel: +44 207 089 4200; fax: +44 207 089 4203; e-mail: awilliams@thecwcgroup.com; web site: www.thecwcgroup.com.
Forthcoming events
Investment in Middle East Oil What is at stake?
Confirmed Speakers include:
• Malcolm Wicks MPMinister for Energy,Department of Trade andIndustry UK
• Dr Thamir GhadhbanFormer Minister,Government of Iraq
• Isam Al ChalabiFormer Minister of Oil,Government of Iraq
• Khalid Al-FalihSenior Vice President,Industrial Relations, SaudiAramco
• Dr Anthony H CordesmanArleigh A Burke Chair inStrategy, CSIS
• Philippe BoisseauPresident, Middle East, Total
• Martin TrachselVP Middle East – Gulf, ShellInternational Gas and PowerLimited
• Vahan ZanoyanChairman and CEOPFC Energy International
Monday 6 and Tuesday 7 November 2006Chatham House, London
This major Chatham House Middle East oil conference will draw together apanel of leading industry and regional experts to assess the changingdynamics of Middle East energy. Malcolm Wicks MP, UK Minister for Energy,is opening this year’s event with a keynote address, setting the scene for twodays of stimulating discussion.
Key themes include
• The relationship between government, society and national oil companies
• The current geopolitical and economic state of affairs in three leading oiland gas producing countries of the Middle East (Iran, Iraq and SaudiArabia)
• The issues surrounding gas for domestic development and gas for export
• The overwhelming interest in and growing concern around energy security
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To register or for further information please emailconferences@chathamhouse.org.ukcall +44 (0)20 7957 5753 or visithttp://www.chathamhouse.org.uk/MiddleEastOil
Organized by
Sponsored by
Supported by Media Partners
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OPEC Bul le tinAnnual sub scrip tion $70
Annual Report 2005Free of charge
OPEC Review(published quarterly) annual subscription rates for 2006:UK/Europe: individual €129 institutional £307The Americas: individual $144 institutional $516Rest of world: individual £86 institutional £307Orders and enquiries: Blackwell Publishing Journals, 9600 Garsington Road, Oxford OX4 2DQ, UK.Tel: +44 (0)1865 776868Fax: +44 (0)1865 714591E-mail: jnlinfo@ blackwellpublishers.co.ukwww.blackwellpublishing.com
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OPEC Month ly Oil Market Report • Crude oil and product
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OPEC offers a range of publications that reflect its ac tiv i ties. Single copies and subscriptions can be obtained by contacting this De part ment, which regular readers should also notify in the event of a change of address:
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Monthly Oil Market Report
Obere Donaustrasse 93, A-1020 Vienna, AustriaTel +43 1 21112 Fax +43 1 2164320 E-mail: prid@opec.org Web site: www.opec.org
September 2006
Feature Article:GDP growth and incremental oil demand
Oil Market Highlights
Feature Article
142nd Meeting of the OPEC Conference
Highlights of the world economy
Crude oil price movements
Product markets and refinery operations
The oil futures market
The tanker market
World oil demand
World oil supply
Rig count
Oil trade
Stock movements
Balance of supply and demand
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Obere Donaustrasse 93, A-1020 Vienna, AustriaTel +43 1 21112 Fax +43 1 2164320 E-mail: prid@opec.org Web site: www.opec.org
New evidence on theasymmetry in gasoline price:
volatility versus margin?
Forecasting volatility foroptions valuation
Returns and volatility in the NYMEX Henry Hub natural gas
futures market
The United States and the Middle East: interdependence not
independence
Vol. XXX, No. 3
Salah Abosedra and Stanislav Radchenko
Mahdjouba Belaifa and Kimio Morimunei
Apostolos Serletis and Asghar Shahmoradi
Gawdat Bahgat
September 2006
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